If you’re thinking about buying a home, you might be getting some well-intentioned but utterly false advice from friends, family, and the media. There are some persistent untruths about the home buying process and first time home buyer programsout there, and we want to set the record straight on some home buying myths.
Spoiler alert: Buying a home is more within your reach than you probably think!
Myth: Millennials Don’t Want to Buy Homes
FALSE. Sorry to bust the millennial-hating bubble, but people born between 1981 and 1997 do own homes and do want to buy them. This is backed up by data science.
The average age for a first-time homebuyer in the United States is 31, a number largely unchanged in the past half-century. Only about one-third of millennials have reached this age, so they are just getting started buying homes. There are 66 million millennials, and according to a study by Fannie Mae, about half of currently renting millennials say they are on the brink of buying a home.
Myth: I need perfect credit to buy a home
FALSE: There are many home loan programs for people with less-than-stellar credit. Each lender has their own underwriting requirements, so definitely shop around.Click here to jump to the links at the bottom of this article for some specific home ownership programs designed for lower-income buyers, first-time buyers, and people with recovering credit.
Myth: I need a 20% down payment to buy a home
FALSE: There are mortgage programs where you don’t need any money down, or as little as 3 percent. While a 20 percent down payment is standard to avoid private mortgage insurance (PMI), there are many home programoptions that allow you to put less down, with or without PMI.
Myth: I can’t get approved for a mortgage if I have student loans
FALSE: Your student loans alone won’t keep you from getting a mortgage, but your overall debt-to-income ratio needs to meet qualifying ratios. Lenders look at your total debt-to-income ratio, and as long as the sum of your monthly debts, including student loans, falls within their underwriting guidelines, you’re good to go.
Help for Home Buyers Ready to Take the Plunge
You don’t want to start shopping for a home before you know what you can afford – that is a recipe for heartbreak. Your lender will give you a maximum budget for the top price of a home you can afford. Take that to your real estate agent and start shopping for homes within your price range.
First Time Buyer Programsto Help You Afford a Home
There are many programs available to people with the dream of home ownership, each with their own unique benefits and advantages:
- FHA loan With an FHA loan, typical first-time homebuyers can buy a home with a minimum credit score of 580 and 3.5 percent down, or a credit score as low as 500 with 10 percent down.
- USDA loan If you live in a USDA-eligible area (there are more than you might think!), you could qualify for a USDA mortgage with 100 percent financing, aka no money down.
- VA loan If you’re an active-duty serviceperson or a veteran of the US armed forces, you are eligible for loans backed by the Veteran’s Administration. These loans have no PMI, no minimum credit score, no money down, and lower interest rates.
- Good Neighbor Next Door This US Housing and Urban Development (HUD) program takes 50% off the price of a home in certain HUD “revitalization areas” if you are a firefighter, law enforcement officer, preK-12 schoolteacher, or emergency medical technician.
- Fannie Mae or Freddie Mac These government-sponsored enterprises guarantee loans for folks who have a credit score of 620 and 3 percent down. They also accept higher debt-to-income ratios, as high as 50 percent.
- HomePath ReadyBuyer Program This first time buyer program from the FHA helps you purchase a home that is part of their foreclosure portfolio.
- Local first-time homebuyer programs and grants. Contact a real estate agent, your state housing finance agencyor state HUD office for information about programs administered by your state and properties in your area.
- Santander’s H.O.M.E. program This comprehensive program helps you with low-down payment loan options, home buyer’s education, and using unconventional sources of funds, such as gifts or grants, towards your down payment.
Don’t be fooled by unfounded fears of homebuying. If you have a good job and are generally financially responsible, you can buy a home. There are many options to help you. Your financial advisor can help you navigate this process and soon you’ll be living the dream of home ownership.
Get more information about the type of mortgage that is right for you.
Santander Bank does not provide financial, tax or legal advice and the information contained in this article does not constitute tax, legal or financial advice. Santander Bank does not make any claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained in this article. Readers should consult their own attorneys or other tax advisors regarding any financial strategies mentioned in this article. These materials are for informational purposes only and do not necessarily reflect the views or endorsement of Santander Bank.
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