Trying to purchase a home while struggling with your financial situation is difficult. Many Americans aspire to own a home at some point in their lives. In fact, 84% of Americans have said that homeownership is a priority to them. Luckily, there are ways that you can still achieve the dream of buying a home even if you are struggling financially!
Understand Your Financial Situation
Before you begin looking at options for homebuyers that need help, you want to understand your current financial situation. What is the current issue that you are facing? Is your credit score low? Do you have enough income? Do you need more money for your down payment? These aspects can help you determine which programs may be able to help the most.
How to Make a Budget
You will also want to get an idea of what you are working with before you enter a home purchase. The key to figuring this out is to make a budget. You will want to account for your current expenses and current income. Your income minus your expenses equals your discretionary income. This discretionary income can account for the additional expenses you will have to deal with when you buy your home. This can also give you an idea of your problem area when understanding your current financial situation!
Consider the USDA Single Family Housing Guaranteed Loan Program
Introduced in 1991, this United States Department of Agriculture (USDA) loan has become an asset to homebuyers who need assistance. The goal of this program is to expand the access of mortgage financing opportunities in rural areas. In the program, the USDA gives loan guarantees to lenders in case the borrower defaults on the loan. The loan guarantee provides a lower risk for the lender. When a lender has a decreased risk associated with lending money then they are able to reach a wider audience.
Perhaps A Federal Housing Administration (FHA) Loan
While USDA loans can be extremely helpful, they specify that the homebuyer must live in a rural area. Not interested in that type of home? No problem! There are still plenty of options to consider that don’t have location specifications for the property. One alternative to a USDA loan is an FHA loan. This is a type of loan that is federally backed and allows buyers to have an affordable down payment and don’t have any area restrictions either! The down payment in this type of loan is typically 3.5%. One of the biggest benefits of this type of loan is the FHA home inspection. These inspections are more in depth than a normal inspection. It is always important to get a home inspection to make sure that you don’t enter a mortgage on a house that needs countless repairs! This can end up ruining your finances and result in your foreclosing on the home.
A Rent-to-Own May be Able to Help
Need to work on your credit, income, or down payment? Don’t worry! You can still work on buying your home while you work on your financial situation. In a Rent-to-Own agreement, you will be able to first rent the home you want to buy before you finalize the purchase. During the lease portion, you will want to work on your financial issues that are preventing you from getting a home right now. These agreements have costs associated with them and may not be a fit for everyone. If the buyer ends up not purchasing the home they may end up wasting money in the end. When dealing with these agreements, make sure to have the help of a professional. They will be able to ensure that you are entering a fair Rent-to-Own agreement that works for your financial situation.
Did You Know a VA Loan Isn’t Just for Active Military?
The United States Department of Veterans Affairs (VA) has created a loan option for service members who have either served in the past or are actively serving! These loans require no down payment and have some wiggle room for closing cost negotiations. This loan has specific requirement guidelines that you will have to meet. There are military, income, and employment criteria that are required.
Navy Federal Loans are Different Than VA Loans
Navy Federal Loans are only available to individuals that are members of the Navy Federal Credit Union. This credit union is tougher to get into compared to a typical credit union. However, just like a VA loan it requires no down payment! It is a great option to consider for military service members.
Missing Down Payment Funds? Consider a Private Mortgage Insurance
Mortgage brokers commonly work with lenders. If you can handle the costs of Private Mortgage Insurance (PMI) then you may be able to pay less for your down payment. There are both benefits and drawbacks to this option. The benefit is the fact that you don’t need as much money down and you will be able to get rid of the PMI once you own 20% of your home. However, the drawback is the fact that you will need to still cover the cost of PMI which will get added to your normal mortgage payment.
First Time Home Buyer? There are More Options for You!
There are countless first time home buyer opportunities available. You can find local, state, and federal program options with a quick online search! There are so many different offers that it would benefit you to see what is available near you.
Credit Unions Offer Great Financing Options
A traditional bank may deny you a mortgage. If that’s the case, then you should turn to other financial institutions to be your lender! Credit unions are a great option to consider because of the fact that they have less strict requirement qualifications for a mortgage. They also typically require a lower down payment. There may be local or online credit unions that can help.
Home Programs with Freddie Mac or Fannie Mae
Both Freddie Mac and Fannie Mae offer their own version of home financing options. Freddie Mac’s Home Possible mortgage provides the opportunity for homebuyers to pay a reduced down payment. Down payments can be in the form of a family gift, secondary financing, or through an employer-assistance program as well. These loans are a great option for people who make less than their area’s median income (AMI).
Fannie Mae’s Home Ready mortgage is another great option to consider as well. This provides low-income home buyers the opportunity to borrow with a cosigner that does not reside at the same residence.
Traditional Banks Offer More Mortgage Options Than You May Realize
Traditional banks account for the fact that low-income borrowers may need different setups with their mortgage. That is why they offer a variety of available options when it comes to the home buying process. There can be programs that help with closing costs, lending repayment guidelines, and more.
Consider Other Options
There are going to be options available at the local, state, and federal level. That is why you need to do some research when considering all of your available mortgage options. A great place to start is at the United States Department of Housing and Urban Development (HUD) website. There is program information that is available that can show you what options you may be able to consider from a federal level. For example, the Good Neighbor Next Door program can provide mortgage discounts and minimal down payments towards individuals that work in a specific profession.
You also may benefit from visiting your local public housing authority (PHA). Your local PHA can provide you information about what assistance options may be able to help you. They also help you understand your qualifications, the application process for housing programs, and more. This is a great information source that can help during your housing journey. The best part? The applications are free!
There are countless options to consider when trying to figure out how to buy a home as an individual with financial issues. You will need to take a look at your financial situation in order to figure out which option would be best. There are countless options to consider like:
- A USDA Loan
- FHA Loan
- Rent-to-Own Agreement
- VA Loan
- Navy Federal Loan
- Private Mortgage Insurance (PMI)
- First Time Home Buyer Programs
- Credit Union Mortgages
- Traditional Bank Mortgages
- Freddie Mac Home Program
- Fannie Mae Home Program
- Other Local, State, or Federal Options
It can feel hopeless trying to buy a home right now. But there are more options than you may have realized. Take your time, research, and you may be able to find a financing option that works for you! There are countless sources of free information that can help online, with your local PHA, at financial institutions and more. Make sure to take advantage of all of the free help that you can get during this time!