Recent statistics show that the national homeownership is at more than 64 percent. This is enough proof that Americans are realizing the perks that come with homeownership instead of renting.
Owning a home means you accumulate equity, on a monthly basis. Stop paying someone else’s mortgage! Here are six ways to get out of the rent cycle and into homeownership.
1. Start Saving For a Deposit
A major hurdle when trying to get your home loan approved is raising a down payment. Saving a down payment requires discipline and budgeting. Most lenders believe that a borrower who has raised the 20% down payment is less likely to default on the mortgage.
Having a larger down payment will improve your chances of qualifying for a mortgage. There are loan programs that require as little as 3.5% down on your home to qualify. You don’t always have to have 20% down to get a mortgage. Of course, saving for a down payment can be the toughest hurdle when it comes to buying a home. Don’t let this deter you from looking into buying a home!
Here are tips to save for mortgage down payment:
- Transfer money into a separate savings account monthly
- Skip vacations for a while and save
- Lower your overall expenses
- Reduce high-interest rate debts (credit cards, student loans, etc.)
- Borrow money from friends and relatives
- Borrowing from a retirement plan
- Sell some investments and save the money
- Get a second job
2. Focus on Improving your Credit Score
Having a down payment is a great start to getting pre-approved for a loan, but you also need to make sure your credit is in good shape. Your credit score helps the mortgage lenders to determine your likelihood of repaying a mortgage. The better your credit score, the more likely you are to be approved for a new line of credit like a mortgage, credit card, or car loan.
You can check the credit score online regularly. To ensure you maintain a positive credit score, consider the following tips:
- Make sure your bills paid on time
- Keep the credit card debt low
- Ask for high credit limits on your credit cards
- Check for credit report errors and dispute any mistakes
- Don’t have your credit pulled to often
3. Research Loan Programs Aimed at First-Time Buyers
First-time homebuyer programs are out there to help you get into a home more easily. Luckily, different mortgage companies provide easy access to homeownership programs with low or no down payment options. Here is a list of the homeownership programs available to first-time homebuyers:
- The FHA Loan Program
- USDA Loan Program
- VA Loan Program
- Fannie Mae or Freddie Mac Loan Program
Check if you qualify for either of the above first-time buyer programs and apply. Various mortgage lenders provide easy qualification requirements, helping new home-buyers get out of the rent cycle. We can explore all of your loan options with you over the phone or in-person.
4. Buy a home with a friend
Did you know that you could collaborate with friends or colleagues and purchase a home? This is an easy way to pull your resources together and become homeowners together. Raise the down payment together and do home shopping. Split the mortgage payments to save money!
5. Spend Less on Rent
Save by renting in a smaller place for a while. You can downsize into a smaller, less expensive rental to save money for your down payment and closing costs. You’ll be amazed how fast you can save when you are living in a smaller rental for a bit. It might be a little cramped, but you will be able to buy your own home faster!
6. Speak With a Pro
For a majority who prefer home rentals, it is not because they are happier paying rent. It is just that they are not aware of the different options available to them. Speaking to a pro will help you skip rent cycles, and move into homeownership. Look to an experienced loan officer who will help you through the different homeownership programs.
Homeownership remains everyone’s dream. Unfortunately, many people do not know how they can move from home rentals into home ownerships. Are you looking for ways to move out of the rent cycles trap? We have looked at six tips meant to assist you. Talk to our experienced mortgage loan officer for further assistance.