It's been a common theme (and complaint) by first-time homebuyers lately -

 

 

"We can't afford a down payment because we are already paying so much in rent, and we are only paying so much in rent because we can't afford a down payment on a home!"

In a recent August survey of 1,887 homeowners in 41 states, 45.4% of first-time homebuyers were found to have been instigated into purchasing a home due to rising rent rates. Just a mere one year ago, that number was only 24.7%.

So how much has rent actually gone up over the course of that year?

In the September 2016 National Apartment List Rent Report Nationwide, rents were found to still be on the rise. Rent increased by 0.1% from July 2016 to August 2016, and by a whopping 2.3% from August 2015 to August 2016.

 

 

Because mortgage rates are still so historically low and there are fewer first-time homebuyers than ever before, rent does seem to be increasing. High rents were cited by first-time buyers as the #1 motivator to stop renting and buy a house, second only to the life events of childbirth or marriage.

 

 

What are some mistakes that current renters  & hopeful first-time homebuyers make?

 

1. Paying off old collections, and therefor awakening 'credit dragons' - Contrary to popular belief, it doesn't always benefit you to comb through and remedy every little detail of you debt history. In fact, in can actually harm your ability to qualify for a mortgage! A safe rule is to leave anything alone that is 3-5 years or older. These items generally have a small impact on FICO score and can actually re-date the derogatory account to reflect upon that month's activity.

2. Making a big purchase before you purchase a home - Word to the wise... Wait to buy that new car until after you've closed on your house! Making any large purchase before buying a home can limit you in more ways than one. It lowers your FICO score to reflect the recent debt incurred, increases your DTI (debt-to-income ratio) and essentially lowers the home price for which you can qualify, and creates more work for you to explain the purchase to a loan underwriter.

3. Falling in love with your dream home BEFORE you have been pre-approved for a mortgage - To those of us in 'the business', this is something we avoid at all costs but it still happens. It's heartbreaking to fall in love with a home that you simply can't afford.Not to mention all the time, energy and resources you spent searching for said home before knowing what you could afford.

4. Transferring money from one account to another - This could easily be considered the most common mistake for first-time homebuyers to make. Underwriters see this as a red flag and become suspicious that buyers are trying to double count the funds available for their down payments.

5. Not reviewing your credit 3-4 months before you want to buy a house - It is simple and easy to pull a FICO-based credit report and given that 80% of homebuyers will discover an error, it's worth knowing about sooner rather than later. Other issues include identity theft, name confusion, a co-signed loan with a late payment - the list goes on and on. Did you know that having your credit card balance a mere $10 over the credit limit could lower your FICO score by 40 points? Find out now so you can start working on issues ASAP.

 

If you're seeking out pre-approval for a mortgage or ready to begin your search, get in touch with us! We'd love to help you on this journey...