While I’m a confirmed renter (I love renting), I know that renting isn’t everyone’s preference. Most people still rather buy. After all, we’ve identified home ownership as a major milestone in life and for finances. The only problem is that most people can’t afford one, according to a recent Bankrate survey.
Do You Have Enough for a Down Payment?
Many lenders decided to back away from zero-down mortgages after the housing market crash and financial crisis. Down payment requirements made a comeback for conventional loans, and the advice to put 20% down, long ignored by many, came back into vogue. However, even though the rule of thumb is still 20% down, it’s still possible to get a home for 5% or 10% down (or less, if you go with the FHA loan or another loan program).
Even though there are some lenders getting back into zero-down mortgages, the perception is still that a bigger down payment is necessary. As a result, the Bankrate data indicate that 29% of people are sure they can’t afford the down payment. And it’s not just millennials who are leery of their ability to make an adequate down payment. Bankrate says more than 31% of the middle-aged Americans who don’t own homes say the main reason they can’t get a home is the down payment.
What About Credit?
The other piece of the affordability puzzle is the credit situation. Bankrate says that 16% of those surveyed cite their poor credit as the reason they can’t get a mortgage. In many cases, that means that there have been financial problems in the past — or that debt is still holding them back. This is a problem with middle-aged Americans as well, with 20% of non-homeowners in this demographic saying that bad credit keeps them from buying a home.
When you add the credit piece to the down payment issue, it appears that nearly half of homeowners have trouble buying a home because of their financial situation.
Another issue that might become more pronounced as the freelance economy takes off is the idea of people who have a hard time getting approved because of self-employed income. When I bought in 2007, I had to go through an income audit in order to qualify for the best possible loan. This is an issue that might keep some self-employed workers from getting a home.
Do People Still Want to Buy Homes?
There also seems to be an increasing number of non-homeowners who just aren’t interested in owning homes — no matter the financial situation. Bankrate reports that 35% of respondents claim they don’t want to own homes just yet. I know that I’m part of that slice. Actually, I’m part of a smaller portion of that slice as someone who isn’t sure that she ever wants to own a home again. I like a more flexible lifestyle that comes with renting and the fact that I bear less responsibility for the property.
Where do you stand? Are you interested in home ownership? If you are, is there something holding you back?