Sometimes, people do things that undermine their chances of buying a house. It can be anything from having way too much credit card debt or forgetting to pay their monthly bills.
Plus, living paycheck to paycheck seems to be the norm in many households, says Tiffany Taradash, vice president of CNN Mortgage in Scottsdale, Ariz.
“That’s an age-old concern that never seems to have the magic answer,” she adds. “Avoiding the need for instant gratification is problem one of the main things that can help fix this problem. If you want something, work hard for it, save your money and when you can afford it, then buy it.”
Some people just give up on buying a house because of their financial situation. For others, they accept the misconception that getting a mortgage is a horrible experience and difficult.
“But this is actually not true at all,” she says.
Rates are still historically low, and lending is no different today than it ever has been. In fact, it’s actually easier, Taradash explains. The exception was in the early 2000’s when so many products were available that in the end were not good options for borrowers. Those eventually led to the crisis that so many people and companies experienced.
“With good credit, a stable job and some money in the bank, the experience should be pleasurable,” she adds.
Biggest financial reasons people can’t get mortgages
Bad Credit
This can be for a number of reasons, mostly too high credit card bills or late payments.
“Credit cards do not have to be a problem when buying a home. They actually can help if balances are kept below 50% of credit limit and payments are made on time,” she says. “If maxed out cards and late payments come into play then credit cards can be a big problem, mainly because it has a negative impact on credit score.”
No Credit
Many potential home buyers just don’t have enough credit lines open. While some lenders can create a credit history by using things like rent payment history, establishing credit is a step any potential home buyer should take.
No down payment
Most people live paycheck to paycheck. So, saving 20% on a $300,000 purchase takes many years and most people don’t like to wait, Taradash says.
However, there are many ways to get help with your down payment including assistance programs throughout the country, gifts from family members, selling things on eBay, consignment stores or through local online garage sales.
Poor job history
Lack of a job, part-time job and not enough time on a job can be several reasons. Stay in a job for more than two years. If you are employed and are looking to buy a home, do not change jobs, she says.
Other financial burdens that can hurt you
Buying a car every two or three years
Buying a car usually should not hinder getting financing for a home unless the payment is too high based on their income, she says. And some people just buy too expensive of vehicles when a less costly one could do just as well.
Getting a new car can also mess with your credit score, and it can push people into different categories when it comes time to see if you can buy a home.
Too many monthly bills
Although loan lenders do not take into effect household type expenses, Taradash says, they do hinder people from saving enough money. By reevaluating things such as high smartphone charges, cable and digital television, subscription radio and video games, and other discretionary spending can possibly help you find more funds available for a new house.
Student loans
Student loans can be an issue, she adds.
“In the past lenders were able to used deferred payments and not count them against a borrower against their debt to income ratio. Today rules have changed, and there are formulas in place to determine how much lenders must use against the borrower.”
Overall, 83% of non-homeowners say they believe that student loan debt has delayed them from buying a home, according to a joint study in 2017 by the National Association of Realtors and education financing nonprofit American Student Assistance.
Taradash says there are great tools to assist individuals in the pursuit of homeownership. The process should start with talking with a personal finance expert, your local bank, accountant and organizations that focus on homeownership.
“Also, pay attention to your monthly bills, and do not miss any payments ever,” she says. “Make sure you keep credit card balances below 50% of the max credit limit, preferably around 15-30% of the limit.”
If you save your money and build more down payment, you will be better off because your interest rate will be lower and the lending process gets easier, she explains.
