Should I stay or should I go? As interest rates dip and rents rise, you may be thinking about jumping into the housing market only to be discouraged by the idea of trying to save for the traditional 20 percent down payment. But there is no “one-size-fits-all” process for buying a home and understanding all the options available will help you make the best-informed decision.
Breaking the “Forever Renter” Cycle
With housing costs continuing to rise across the U.S., you may worry that you’ll be renting forever. In California alone the average home costs $440,000, nearly two-and-a-half times more than the national average, and rent is 50 percent higher than the rest of the country.
The best way to get started is to get smart about your financial situation. Credit unions are a great option because they take a personalized approach to home lending by understanding the needs of each member, then tailoring products and programs to meet those essentials in ways that banks and mortgage brokers do not.
Down Payments Are Possible in This Lifetime
A recent study by Trulia calculated it would take a Millennial (aged 18-35) with a college degree nearly 15 years to save for a 20 percent down payment in Denver on a median-priced home.
“The number one problem for first-time home buyers is that they simply don’t have the cash,” said says Rebecca Reynolds Lytle, Senior Vice President & Chief Lending Officer at San Francisco Federal Credit Union. “This causes them to worry about having gray hair by the time they’re able to afford a home.”
Credit unions are setting themselves apart from banks by creating lending services specifically to address changing and often unmet needs of members. For instance, Meriwest Credit Union of San Jose, Calif. has developed a different roadmap for lending by partnering with Housing Endowment and Regional Trust (HEART), a nonprofit that helps moderate-income families buy their first home in the challenging San Mateo County housing sector.
Mortgage Options Tailored to You
Programs like Meriwest’s “Opening Doors” homebuyer loan program combine a first mortgage up to 80 percent loan-to-value, with a second market rate loan, to facilitate a home purchase with a minimum 5 percent down payment. The program allows first-time homebuyers to put 150 percent of their median income toward a monthly payment. This reduces homeowners’ monthly payments and does not require them to buy private mortgage insurance for the loan, which saves thousands of dollars in annual mortgage insurance premiums.
The benefit to working with a credit union is that they can help educate you about how to build personal finances to make you an attractive borrower.
Ready. Set. Go!
When you’re ready to start looking at homes be sure you are prepared:
- Get Pre-Approved and Do Your Research. An informed buyer is an empowered buyer. Being pre-approved will save you a lot of time and minimize the chances of being misled into buying a house you can’t afford. You can get pre-approved online for free in less than 20 minutes.
- Buy The House. Don’t get scared off from purchasing a home by falling into the ‘forever a renter’ mentality. Buying a house is a solid investment in your future and may be the best investment you make in your entire financial portfolio. It can even make you money in the long run.