By Lisa Weinberger
Yes! You can buy a home if you are not rich. A little knowledge can go a long way. If you think buying a home is out of reach because you have little savings or a mediocre credit score, think again! There are lots of options, and programs, that clear the way to help you make your home buying dream a reality.
Know What You Can Afford
The first thing to consider is your budget. You can use a mortgage affordability calculator to estimate your budget. A clear budget will help you narrow down the neighborhoods and type of home you can afford.
Would you agree to sell your home to someone not knowing if they can afford to buy a home? Probably not. Show a seller you are a serious buyer by getting a free mortgage pre-approval from a bank. Plus, there is zero commitment. You can still shop around for the best mortgage once a seller has accepted your offer to buy the home.
If you have little money for a down payment or poor credit, you really can still buy a home. The government offers FHA loans for as low as 3.5% down payment of the purchase price for FICO scores above 580. If your score is above 500 you can put just 10% down payment. Don’t know your credit score? The government offers you a free annual credit report.
The benefits of an FHA loan are:
- Low down payments
- Low closing costs
- Easy credit qualifying
The government offers FHA customer service in both English and Spanish at: (800) CALL-FHA or (800) 225-5342 or go to the FHA website to learn more.
Get the Best Deal
The trick to affording a home when you aren’t rich is finding the best deal. This is no different than shopping at the mall and looking for discounts. The government forecloses (takes over) homes, for various reasons and usually sells them at discounted prices and with great incentives/offers. You won’t find these listings in the newspaper, so you need to know where to look!
U.S. Department of Housing and Urban Development (HUD) has homes for sale across all 50 states. If you are a teacher, firefighter, or police officer, there is an additional program just for you. It is called the Good Neighbor Next Door and offers a discount of 50% from the list price of the home. In return you must commit to live in the property for 36 months as your sole residence. Also the qualifying homes in this program are in revitalization areas.
HomePath.com allows you to buy properties owned by the government agency, Fannie Mae. First-time home buyers can sign up for a free HomePath Ready Buyer program course and receive up to 3% of free money towards closing costs.
Get Creative…Think Outside of the Box
Can’t afford a house but need the space? Consider a condo, co-op, or townhouse. Sometimes attached dwellings are an affordable first-time home buying option. Another idea could be renting out your spare bedrooms to offset mortgage costs.
Check out less “popular” neighborhoods that fit your needs. They may not be on the radar yet but they might still have what you’re looking for: more space, decent commute and affordable price.
Becoming a first time homebuyer is an exciting life step. Prepare yourself and budget to make the transition as smooth as possible.
Lisa Weinberger is a freelancer whose work has appeared on Bankrate, Fox Business, Yahoo! Finance, and LendIt. She is a digital marketing strategist @PearlyWrites and loves to educate others. Follow her on Twitter: @LisaWeinberger