Many Renters Erroneously Think They Can’t Afford to Buy

person wondering whether to buy or rentThe average price of rent in New England, and across the country, continues to inch upward, yet many of those renters admit they are afraid to buy a home. In a recent survey conducted by Bankrate.com, almost half of the renters polled said that they have avoided purchasing a home because they don’t think their credit is good enough for them to be able to qualify for a mortgage. These renters also expressed that they could not afford a down payment which, they believed, was always required.

Marietta Rodriguez, vice president of NeighborWorks America, a national home ownership programs says this in response:

"A lot of people make assumptions that they can't afford to buy based on just some perceptions, and many have not taken the step to figure out how mortgage-ready they are."

Certainly the housing crisis (back in 2007) has something to do with these lingering doubts and misconceptions of would-be home buyers. And, of course, unless you take the first step and investigate your chances, it is easy to just fall victim to, “I can’t afford to buy” notions. For a while, it was admittedly very tough to get a loan unless you were financially well-off – essentially you could get a loan if you really did not need one. Thankfully this is no longer the case, but many renters have not explored enough to know that their chances have dramatically improved.

According to the survey, a whopping 35 percent of non-home owners say they don’t want to own a house yet. The reason again is based on lingering fears that were fueled over the last nine or so years during the housing crash and recession. With foreclosures and job loss in the news, it set a tone that many still have in the back of their minds when they think about major purchases and investments.

Beyond the Fear is Misinformation

According to the survey, those who rent are under the misguided information that they need a sizable down payment, a belief that is highly inflated versus reality, in order to purchase a home. When asked how much they thought they needed, about 20 percent of respondents to the survey thought that they had to have at least 11 percent to 20 percent of a home’s price saved toward a down payment. And 17 percent said they were certain that they had to have anywhere from 6 percent to 10 percent.

Some, about one-quarter of those surveyed, admitted they didn’t know how much they need for a down payment, but it was probably more than they had saved. Only 9 percent of respondents said they could do a 1 percent to 5 percent down payment.

The Truth is You Probably Can Afford to Buy

With this general lack of accurate information and credit awareness, there seems to be much these renters need to know. Like the fact that they can get an FHA loan with just a 3.5 percent down payment or a conventional loan with a 3 percent down payment.

The best way to educate yourself is to reach out to a lender and see if you qualify. You can also contact a nonprofit housing counseling agency for lending program advice. At the very least, you will arm yourself with the facts about where you stand financially, so you can be ready to buy a home if this is something you dream of doing. Your “someday” could be sooner than you think.

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