Interest rates are low, but will I be able to get a good deal with my credit? Can I afford a down payment? For many, it’s tough to determine whether now is a good time to buy a house. When you have the facts, you might find that homeownership is much closer than you think.
Get the Facts and Dispel the Myths
Myth: It’s a bad time to buy a house.
Mortgage rates are at historic lows, creating lower payments and long-term savings. Home prices have also fallen and the dramatic increase in foreclosures has created an abundant housing supply that is outpacing demand. For many, these factors result in greater affordability, making now a good time to consider homeownership.
Myth: Buying a house is just too risky; I’ll end up in foreclosure.
The risks are present. Losing your job, or suffering an illness could make paying your mortgage more difficult. While you can’t predict the unexpected, there are things you can do to decrease your chances of ever facing foreclosure:
- Buy only as much house as you can afford.
- Look at your current expenses, and consider ways to reduce your monthly spending.
- Build an emergency fund in the event of the unexpected.
- Talk with your lender if you are having difficulty making payments. They’ll have programs to help get you back on track.
Myth: I need perfect credit to buy a house, but I can’t do anything to improve my credit rating.
Lenders are not expecting you to have perfect credit, but having a good credit score and credit history that shows you intend to repay your loan obligation will help you get better interest rates. If you are concerned that your credit may not allow you to qualify for a loan, looking at your credit report and understanding how your score is calculated could help reveal the areas that need improving. According to the Fair Isaac Corp., your FICO score is 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, and 10% types of credit used.
Myth: I need to put 20% down.
While there are instances when a 20% down payment is required, that is not the rule, even by today’s standards. Generally, putting 5 or 10% down is a reasonable expectation. Every situation is different and the amount of down payment required will depend on:
- The value of the property
- The amount you are financing
- Your credit rating
- Your debt-to-income ratio
Take the Next Step Toward Owning Your Own Home
There are many variables to consider about the home-buying process, so let SMCU help you get all the facts. If you are ready to start the home-buying process or if you have questions, give us a call at 206-398-5888 or email us at email@example.com.