Market Watch: Knowledge is Power

According to a recent Bankrate survey, almost 50% of renters are hesitant to purchase a home. Respondents believe their credit rating would not qualify them for a mortgage despite many having not tried to pre-qualify for a mortgage. (About 29% feel they cannot afford a down payment and 16% feel their credit isn’t sufficient to qualify for a mortgage).

Approximately, 35% of non-home owners responding indicated they didn’t want to purchase a home quite yet. This is most likely due to the residual effects of the economic down turn. Many people experienced foreclosures, loss of employment, or were forced to declare bankruptcy. These experiences can be difficult to forget.

Many non-home owners also are under the wrong impression as to the amount of down payment required to purchase a home. (Almost 25% of the respondents did not know how much of a down payment is needed to buy a home.) Approximately, 20% of respondents said they need 11% to 20% for a down payment; and another 17% said they need 6 to 10% for a down payment. The remaining respondents thought a down payment of 1% to 5% was enough.

Of the respondents saying they didn’t want to purchase a home quite yet, 44% were millennials (ages 18-29), 28% were 30-49 years of age, 29% were 50-64 years of age and 30% were 65 years of age or older.

The lack of knowledge of home purchasing requirements and qualifications are of concern. Many can own a home and stop paying rising rents, but the need to know if they are eligible for a mortgage and can afford a home. At the very least by taking these steps, they can learn of how much they can afford or what needs to be done in order to qualify for a mortgage. Knowledge is empowering.

To remove the fear of purchasing a home, first confirm with a mortgage broker to see how much of a home you can afford and get a pre-qualification letter. Then contact a realtor to begin looking at homes in your price range. The realtor can get information (taxes, maintenance, etc.) on homes of interest to provide more of an idea of carrying costs.   Looking on websites for houses can help narrow the areas of consideration, but let your realtor know what properties are of interest. Often, web sites don’t have current information. A realtor can further assist in the cost-benefit and trade-off process involved in the purchase process.

A multi-family home or an investment property may also be of consideration. A multi-family would provide income to defray from carrying costs. Another option is to buy a property to rent and save the income to trade-up or fund other interests. Home ownership can provide many opportunities, but information and guidance are needed to make an informed decision.

Mary Ann Clark is a realtor with Coldwell Banker at 177 West Putnam Avenue in Greenwich. Questions or comments may be emailed [email protected]

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