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Many Americans dream of buying a home – especially when you consider that mortgage rates are near all-time lows (Check out the lowest mortgage rates you can get right here here) – but most think that getting a mortgage will be difficult. A survey by the National Association of Realtors found that about six in ten think they would find it difficult to get a mortgage. However, experts say that if you are aware of the obstacles you may face, you can better prepare yourself to cut all red tape.
“The biggest obstacle to getting a mortgage is the step before it: make a successful offer on a home. The competition among home buyers is fierce, ”said Holden Lewis, home and mortgage expert at NerdWallet. (Here are tips on how to create a successful home offer.) After that, however, you should be clear about the mortgage hurdles. (Here you can find the lenders with the best terms in your area.)
The cost is too high
Jacob Channel, senior economist at LendingTree, says cost is the biggest barrier to getting a mortgage right now. “Although home prices are cool in some parts of the country, they are still high compared to where they were before the pandemic. As a result, borrowers have to take out larger loans in order to purchase a home. This poses a problem as lenders can typically charge higher income or make higher payments from people looking for larger credit. As a result, some potential buyers find they don’t make enough money or don’t have enough money to get a mortgage approved, ”Channel says.
In such cases, Channel recommends looking for a cheaper home and rethinking what you need in a home. “If you’re willing to forego a few amenities or features in a home like a large yard or an extra bedroom, you may be able to get it working,” says Channel. Other ways to traverse this scenario are finding a home in a less expensive neighborhood or staying in your current home and saving more money.
You are looking for a low value mortgage
According to a 2020 study by the Urban Institute, buying a home is harder than ever for families, especially those first time homeowners, because small dollar mortgages are not readily available. “Affordable, low cost real estate still exists in urban, suburban and rural communities, but access to the small dollar mortgages needed to finance them is not readily available. Not only are potential homeowners finding fewer lenders offering small dollar mortgages fewer, but once they do and apply they are more likely to be turned down than potential homeowners applying for larger loans, ”the institute writes. However, there are options for a low-value mortgage, but it can require significantly more homework. (Check out the lowest mortgage rates you can get right here here.)
You have credit problems and income problems
“The income disorder that millions of households have experienced since the outbreak and that many are still experiencing could make it difficult to qualify if income is still not normalizing,” said Greg McBride, senior financial analyst at Bankrate. Additionally, even if your income is coming back when you struggled to pay your bills, you may have had some credit issues during periods of low income. This is not insurmountable: by not missing out on future payments, catching up on overdue accounts, settling revolving account balances, and limiting the frequency of applying for new accounts, you can help bring your creditworthiness into a more acceptable range. And when it comes to your income, as MarketWatch reported earlier this year, before you apply for a mortgage, you should look for ways you can add other streams of income.
You are self employed
Last year has been particularly tough for self-employed borrowers, and “Lenders check everything from the company’s website to make sure there are no pandemic closings or business restrictions, to bank statements and income statements that are used to qualify refinance “, Says Denny Ceizyk, Senior LendingTree. You should keep this in mind if you are self-employed and want to take out a mortgage. (Here you can find the lenders with the best terms in your area.)