First-Time Home Buyers Have One Big Hurdle to Overcome

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It’s no secret: Housing costs are expensive. Rising rents and a strong real estate market are making it harder for first-time buyers to get a piece of the American dream.

Buying a home means getting these four areas of your finances in shape:

  • Credit
  • Debt
  • Income
  • Assets

If you do not know where you stand and if you want to make an offer on a home, getting pre-approved is an important first step. Getting your financial house in order should be priority No. 1 if you intend on buying a home now or down the line. A pre-approval involves having a lender ensure that your credit score is sufficient, you have the cash to close on the home, your income supports the debt load plus your other liabilities, and you have the financial character and capacity to make a big-ticket purchase. While credit score, income, and debt allowance are all important puzzle pieces, your cash to close reigns.

The hard reality

There are no more first-time buyer programs available. All the first-time buyer programs that did exist have long since expired.

While there is a possibility of finding a county, state, or HUD program to assist with down payment, the next order of business is coming up with closing costs, which equates to just about 2.5% of the home price (not the loan amount). For a $400,000 home, that’s $10,000 needed just for closing costs, independent of the monies used for the down payment. The challenge that first-time buyers face is having enough money both for the down payment and closing costs.

Here’s what will happen in the following situations:

If you have an excellent credit score, but you don’t have the cash…Then your home-buying project will get put on hold until you have enough money to seal the deal. Click to read more.

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