Most renters would like to takeÂ the next step toward homeownership. They just donâ€™t think they can -- yet.
In fact, 91 percent of Millennials stated in a recent survey that they want to own a home.
This group, roughly age 25-34, represent the majority of potential first-time home buyers, according to Ellie Mae, the loan software company that conducted the survey.
The problem -- or perceived problem -- for many potential homebuyers is the downpayment.
Inability to raise the necessary downpayment was stated as a common barrier to owning a home, cited by 45 percent of respondents.
The other major challenge, according to twenty-nine percent of survey takers, is theÂ inability to qualify for the mortgage.
Knowing about these loan products and downpayment options will fast-track your homeownership goals, even ifÂ perceived barriers have kept you from trying.Click to see today's rates (Mar 28th, 2017)
A common home buying myth is that it takes a 20 percent downpayment to buy a home.
For a $300,000 home, thatâ€™s sixty thousand dollars.
Fortunately, this myth doesnâ€™t hold water. Most would-be buyers are around 30 years old. Not many of these Millennials have that type of cash stashed in savings. They will someday, but not yet. Not with student loan debt obligations still in play.
Of course, if you want to save that 20 percent downpayment you can. Just save $12 every day and youâ€™ll have your downpayment banked sometime around 2027.
Thatâ€™s way too long. Home prices will likely outrun efforts to save up 20 percent of your future homeâ€™s purchase price.
Knowing your flexible mortgage loan options is yourÂ first move. From there you are just a series of small actionable steps away from making homeownership happen.Click to see today's rates (Mar 28th, 2017)
There is no universalÂ mortgage guidelineÂ that all applicants must adhere to. Mortgages come in a variety of formats to meet a wider populationÂ of home buyers.
From low downpayment requirements to credit score leniency, thereâ€™s a loan type for most home buyers today.
The popular FHA home mortgage program requires just a 3.5% downpayment. This financing type is also more flexible for those lacking an extended employment history -- like fresh college grads -- and those who have experienced a credit hiccup.
Speaking of credit, these loans also allow a borrower to have no credit score at all. Many young people have never had so much as a credit card. According to written FHA rules, lenders are not allowed to deny a loan applicationÂ based on lack of credit history.
Rather, the FHA lender should help the applicant establish a credit score and history via utility payments, cell phone bills, car insurance, and rent history.
VA mortgages require no downpayment or mortgage insurance. Credit guidelines are lenient, and, like FHA, accept non-traditional credit history.
Active military personnel need only 90 days of service to be eligible for the VA home loan program. If you are a veteran or qualified serviceman you shouldÂ explore this option first, as it comes with unmatched advantages.
Conventional loans make up around 60 percent of the market. Most assume conventional loans â€“ those backed by Fannie Mae and Freddie Mac â€“ are ultra-conservative and reserved for only the best applicants.
Yet conventional loans now offer three-percent-down (97% LTV) financing through the Conventional 97 program as well as HomeReadyTM, the latter accepting non-borrower household income to qualify.
The HomeReadyTM mortgage is perfect for multi-generational households, home buyers with a history of living with roommates, and non-married individuals buying a home together.
The United States Department of Agriculture (USDA) offers this loan to home buyers in suburban and rural areas to promote economic development in these regions.
USDA loansÂ require no downpayment and a credit score minimum of just 640.
They are available from most lenders in the U.S., rather than directly from a government agency. Furthermore, these mortgages come with very low mortgage rates, which lowers the monthly payment, and further increases chances of qualifying for new buyers.Click to see today's rates (Mar 28th, 2017)
Sometimes, buyers choose to make a downpayment, even if it's a small one.
The cashÂ doesnâ€™t always have to come from a bank account into which you have made years of deposits. The following are ways to come up with a downpayment -- ways that new home buyers don't often consider.
The IRS allows 401(k) home buyers to borrow as much as $50,000 from the vested portion of their accounts.
Many times the payments are deducted from your employment pay check every month. The interest rates are usually favorable too.
The IRS allows for a maximum one-time, penalty-free distribution per person of $10,000 for a first-time home purchase or for building a home.
The IRS exemption guidelines for a traditional IRA and a Roth IRA are a bit different though. Consult with an accountant about tax implications.
Your immediate family members and even more distant relatives or godparents can contribute to an FHA loan downpayment.
Be prepared to document the gift funds thoroughly, including proof of donorâ€™s ability to give, which generally requires the gift giver to provide a bank statement.
Deposit your tax refund directly to a downpayment fund or redirect a small portion of your paycheck there. Some banks will even round up to the nearest dollar with every purchase, depositing the difference into your savings account.
Minimize your temptation to tap that fund by refusing checks and debit cardsÂ for the account.
Would you prefer a kitchen gadgets or downpayment money for your first home? FHA allows for a bridal registry to be used toward yourÂ downpayment.
Consult your loan officer on how to document it and you could be well on your way to a solid downpayment by the time you get home from the honeymoon.
More than 2,300 homebuyer programs are available nationwide and nearly 80 percent of first-time buyers could qualify for a program of some sort.
Who offers these programs?
Homebuyers should investigate these downpayment assistance options upfront. They add time to the mortgage loan process so getting started on this path early is strongly advised.
Mortgage rates are low and itâ€™s a perfect time to apply to purchase a home. Traditional challenges to homeownership should not stop todayâ€™s home buyer from applying.
Get a rate quote and check your eligibility to buy a home. Quotes are free, quick, and require no social security number to start.Click to see today's rates (Mar 28th, 2017)
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.
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2017 Conforming, FHA, & VA Loan Limits
Mortgage loan limits for every U.S. county, as published by Fannie Mae & Freddie Mac, the Federal Housing Administration (FHA), and the Department of Veterans Affairs (VA)