A recent survey conducted by the Lending Tree found down payments continue to be the biggest hurdle for more than half of consumers (54%) who want to purchase a home someday. In fact, 48 percent of renters worry they will never be able to buy a home. Other barriers include home prices being too high in their area (36%) and difficulty qualifying for a mortgage due to a low credit score (32%).
"The market may seem overwhelming for many first-time homebuyers to jump in right now due to rising prices and stiff competition, but it is never too early to prepare by beefing up your savings and understanding the steps to qualify for a mortgage and purchase a home," says Joanne Fraser, president of the Silicon Valley Association of Realtors.
Fraser suggests the following tips to help consumers accelerate their savings and get them mortgage-ready:
Educate yourself about the homebuying process.
Understanding how to qualify for a mortgage and purchase a home will give you the confidence to move forward. Start your research by visiting the Consumer Financial Protection Bureau (CFPB) and U.S. Housing and Urban Development (HUD) websites online.
Check your credit report for accuracy.
Buyers with a poor credit report may have a hard time obtaining financing or are offered loans at higher-than-market interest rates. You can receive a free credit report from each of the three nationwide credit reporting companies every year. Visit https://www.annualcreditreport.com to request a report.
Keep your finances in good standing.
Review your monthly income, expenses and savings. Where can you reduce expenses and still live comfortably? Then stick to a budget you can live with. Paying bills on time will help build a good credit rating.
Understand what you can afford.
Set limits on the type of home you can afford according to your income and comfort zone. Keep in mind that homeownership is not just about saving for a down payment and affording a monthly mortgage. You are likely to encounter costs for repairs and maintenance of your new home.
Explore down payment options.
Many first-time homebuyers think they need to have a 20 percent down payment in order to purchase a home, but there are low down payment loans and assistance programs for first-time home buyers offered by federal, state and local agencies. Loans backed by the Federal Housing Administration (FHA) allow down payments as low as 3.5 percent. California first-time homebuyers can visit the California Housing Finance Agency (CalHFA) website for down payment options and closing cost assistance. Many cities also offer grants and other financial assistance for first-time homebuyers.
Consult a Realtor
As a buyer, you want someone who knows the market and has experience handling the particular needs of homebuyers. Realtors have the training and expertise to help you with all aspects of the real estate transaction, from information regarding obtaining a mortgage to helping find the right home for you.
"Today's homebuyers and sellers deserve to know that their Realtor is someone they can trust and who has their best interests at heart," says Fraser. "The homebuying process can be overwhelming, especially for first-time homebuyers, but you don't have to go through the process alone."
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.