The Top 5 problems People Face When trying to Buy a Home

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Since the day I was born in 1969, I’ve been privileged to live the majority of my life in a home. My parents first lived together in a small house beneath the shadow of a major expressway in Chicago – a bungalow I barely remember – prior to moving into a two-story house by the time I turned 3 years of age.

Eons later, after a spate of time spent living in apartments during my college and post-college years, my husband and I have been favored to own three different homes since the day we purchased our first starter home.

I’ve pretty much taken for granted that home-buying is a common thing – a right, almost – that is, until I examined the way the economy and other factors have affected home ownership.In that light, here are a five things that usually represent the biggest obstacles to buying a home:

11 Reasons Why some People Don’t Want to Buy a Home The Top 5 problems People Face When trying to Buy a Home

#1 – LACK OF A DOWN PAYMENT FOR THE HOME

There are buyers who exist that can afford to pay the full price for a home in cash – without needing any other financing. However, those who don’t have the funds to write a check that won’t bounce for their dream home’s price tag must consider a mortgage.

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Only VA loans, which arean option for veterans who meet specific requirements, allow homebuyers to put down $0 in down payments. The most popular kinds of mortgages – conventional loans and FHA loans – necessitate a down payment that could run anywhere from 3.5% to 10% of the property’s sales price.

#2 – GETTING A FICO CREDIT SCORE THAT’S HIGH ENOUGH

Your FICO score needs to be at least a minimum of 620 for FHA loans – and even higher at 720 for conventional loans with mortgage insurance in order to qualify for those types of loans. You may be able to get away with a FICO score of 620 in order to get a conventional loan without mortgage insurance, but you’ll end up paying a heavy price.

Ask your lender to run your credit report to find out your FICO score – and be advised that it will most likely represent the middle score of the one received from the three credit reporting agencies that your lender pulls. There are places online that can allow you to get your FICO score for free, and certain times you’ll be able to obtain it at no cost (such as when you’ve been denied credit) – but this score may differ from the one your lender obtains.

#3 – MAKING ENOUGH OF A MONTHLY GROSS INCOME TO MEET LENDER RATIOS

The amount of money you bring in from your job or career each month matters when you’re seeking out a mortgage loan. These ratios are put in place to ensure you’re not getting in over your head with buying a home.
For instance, you’ll probably be expected to hit a maximum 33% front-end ratio, which means the amount of your mortgage payment added to your taxes and insurance (PITI), can’t be more than 33% of the gross income you have each month. This means if your gross income is $5,000 each month, the largest PITI payment you’ll qualify for is $1,650 monthly.

As far as the back-end ratio is concerned, it’s a little more involved. You’ve got to add your PITI payment to all your revolving monthly debt payments to get a percentage of 41% to 50% of your gross monthly income in order to look good for a loan – based on the specific loan and the lender in question. So if your back-end ratio tops out above the 41% maximum, that means you might have to come up with at least 20% of the home’s purchase price as a down payment.

#4 – GETTING A GOOD APPRAISAL AT THE VALUE OF THE PROPERTY

You want to hope and pray you get a good appraiser that’s familiar with the property and the neighborhood, and knows how to provide a balanced and fair assessment of the value of the property.
If you do get a low appraisal that doesn’t meet the value, and on top of that, if the property’s seller won’t adjust the price downward accordingly, homebuyers that have an appraisal contingency clause can choose to abandon the deal or make up the difference in cash.

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#5 – STRUGGLING TO MEET ALL THE CONDITIONS OF THE LOAN

The world of mortgage loans can be scary yet exciting. There are situations you may never have anticipated that can affect your ability to buy a home. Let’s say you’ve divorced and remarried – you might not realize that if your ex owned a house that experienced a foreclosure or short sale and your name was still on that mortgage, that’s an instance that could end up disqualifying you from purchasing a new home with your new mate.
Honesty is the best policy when it comes to seeking a mortgage loan. Disclose everything and hope that your lender is qualified enough to advise you accordingly on overcoming all the above obstacles.

Tag : problems when buying a home

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The Top 5 problems People Face When trying to Buy a Home
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