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3 Key Barriers To Home Ownership Are Beginning To Ease. Here's The Scoop.

January 10, 2018

3 Key Factors Are Beginning To Trend Towards Buyers



Owning your own home remains 'The American Dream', but qualifying for a new mortgage or meeting steep down payment requirements gives many potential home buyers nightmares...With a little research, today's home buyers might rest a little easier due to 3 important primary factors:


#1 - Large Down Payments Aren't Necessarily Required



Think you need a 20% Down Payment to purchase a home (or obtain a good interest rate when you do)?  Think again.  Since the market downturn more than 10 years ago, mortgage loans are again being offered with less than this traditional requirement - - in some cases substantially less cash for a down payment:


     * Tried and true, the Veterans Administration (VA) Loans remain a tremendous resource of low- or no-down payment home financing.  Qualified Veterans can obtain VA Loans with No Money Down (100% Financing) for home purchases up to $679,650.  If buying over that amount, the Down Payment is 25% of the additional amount over the $679,650 cap, which helps Veterans who buy in high priced markets such as Northern Virginia.


     * Federally-backed FHA Loans offer attractive rates with just a 3.5% Down Payment minimum, some or all of which can be in the form of a gift from a family member (i.e.- parents assisting their children).  Coupled with exceptionally lenient qualifying ratios (see below), FHA Financing is a real workhorse in our marketplace, particularly with first-time home buyers


     * What's new in the marketplace is the return of Conventional (not VA or FHA) Loans with little or even no down payment requirements.  A common new loan vehicle is a 97% Conventional Loan requiring just a 3% Down Payment.  A number of sources are beginning to offer such programs along with a variety of program-specific requirements, such as minimum credit scores, income parameters, first-time owner requirements, use on a primary residence only, etc., with some even permitting Gift Funds or providing attractive terms if the borrower completes specific education requirements geared towards assisting new homeowners with budgeting and affordability.


The bottom line is that a large down payment is NOT a prerequisite to buying!



#2 - Qualifying Income Might be Less Than You Think


Mortgage Lenders express an individual's qualifications for a new loan as their "Ratios", that is the Ratio of their Debt to their Income.  Put another way, how much of your total income can be used for your ongoing housing costs.  The news here is that the Mortgage industry as a whole has begun to loosen the reigns a bit when it comes to the maximum Ratios that they will allow in approving a new loan for a borrower. 


After getting burned in the downturn, Lenders understandably tightened their requirements for new mortgage loans.  The good news is that Lenders are beginning to allow for somewhat higher Ratios when determining a borrower's creditworthiness, which is a good thing in an expensive real estate market such as ours. 


Sensible, conservative guidelines still prevail, but Lenders are willing to let you 'stretch' a bit these days if all of your other indicators and factors are strong.


#3 - Your Credit Score May Not Be A Barrier After All


Make no mistake, having stellar credit puts you on the fast track to getting that new mortgage loan, provided that everything else makes sense.  What's new here is that certain loan programs may allow for a more 'forgiving' minimum credit score which opens up potential home ownership to more people, just like lower down payment requirements and broader Debt-to-Income Ratios may do.  So, a modest credit score might not mean that your loan application is dead on arrival - - to the contrary, you might be surprised at the attractive programs that allow for less-than-excellent credit ratings.


Again, your ability to qualify for a great interest program and rate might be within your grasp, but you need to explore all options to know what approach is best for you!  



Your Best Bet


Curious what you can afford in today's marketplace?  Your best bet is to meet with a seasoned, experienced Mortgage Loan Officer to discuss your specific situation in greater detail.  Armed with all of your information, they can show you your options and guide you to the loan program that best meets your needs.


Want More Info About Buying A Home? 


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Have questions about the Home Buying or Home Selling process?  We are here to help, just as we have guided and assisted hundreds of Northern Virginia buyers and sellers!  


Remember, we help our SELLERS to get "The Most Money For Their Home", and our BUYERS to get "The Most Home For Their Money" - - and we can do the same for YOU!


"We Sell Homes From A Fresh Perspective...YOURS!"


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