Believe it or not, many of you reading this article are renting because you don’t think you have the ability to purchase a home of your own. Much of this misunderstanding is because of the Dodd-Frank act that was passed after banks allowed people to buy higher prices homes with mortgages they couldn’t afford to pay. During the early 2000’s, qualifying for a mortgage was entirely too easy and so when the housing crisis hit starting in 2006, there was an epidemic of short sales, foreclosures, and even folks just walking away from the home they could no longer afford. The Government stepped in passing the Dodd Frank act in 2010. This legislature went too far the other way tightening the underwriting guidelines which made it much more difficult to qualify for a loan.
Fast forward 7 years and by 2017, the ability to apply and qualify for a loan became easier. The problem was no one told those who were and are renting. Therefore, the misconception of an arduous mortgage process and that one needed a 20% down payment along with an additional up to 3% in closing costs, has kept many renters from even considering buying a home.
I write this article due to a young couple coming into the office the other day. They are a great example of what I have just written about. They have decided to move to another state and the wife’s mom (who is a Realtor) said they should consider buying. They were sure they couldn’t because they didn’t have much saved. They met with a loan officer who counseled them. They were ecstatic to find out that they only needed about 6 ½% of the sales price (3 ½ % down payment and at most 3% closing costs). On a $200,000 purchase this amounts to no more than $13,000 and if you can get the seller to pay your closing costs it gets reduced to $7,000. Better yet, you might qualify for a loan that requires no down payment which means you could buy a home using less money than you pay to rent a home (security deposit and 1st month’s rent.) They also were amazed that they could do the whole mortgage application online and with this particular lender, find out within 10 days that they were qualified.
It is true one can go online these days and search for homes and get ideas of what a property might be worth. What most find out however, they need someone they trust who can decipher all the information and help them navigate what still remains a complex process from finding the right home, getting a contract accepted, working through inspections and the appraisal, getting the loan fully approved, and finally signing all the many documents to settle on the property.
When a young couple was asked realized why having a Realtor is important, they shared, “you might be able to find your dream home on an app but it is next to impossible to live your life, work, raise your children, exercise, and do whatever else you do and try to find that perfect home simultaneously. When you find the right agent, it makes buying a home such a wonderful and memorable experience.”
The key takeaway to this article is don’t believe what others tell you about buying a home. Find a Lender and Realtor you can trust and have them explain all the ins and outs. Only then will you know if this is the right time to buy your first home.
Michael Guthrie Broker/CEO Roy Wheeler Realty Company