Many Americans these days are living at home with family as opposed to living out on their own. This is not necessarily a bad thing financially or responsibly but socially can be tough. Let’s talk about it and explain how we can help you get out there on your own! (Without paying crazy high rent).
Here are some reasons living at home is beneficial:
-Live rent-free or with minimal rent and save up money
-stablish employment history (2+ years is generally good)
-Pay off other debt like student loans, credit cards, ß very important for getting a mortgage
-Work on your credit scores / Also very important
-Study how real estate works / Educate yourself!
-Figure out where you want to buy and what’s your goal for the next 3-5 years.
It can also be helpful to move out, pay rent, and live on your own a bit to get a better understanding of what it’s like in the real world. And qualifying for a mortgage might be easier if you have documented rental history but its not a must.
While sacrificing privacy and your space it can be a good time to set yourself up for success. There are a few easy steps to take to ensure a smooth and efficient mortgage loan.
- Establish Your Credit History While at Home
- Make sure you have 3 open and active bank accounts (includes credit cards, auto loan/leases, student loans)
- Aim for credit scores of 760+ for best mortgage rates
Building your credit history is the most key while you’re not paying a mortgage or high rent. This is very important in terms of qualifying for a mortgage, especially if you don’t have prior rental history.
If you can’t show the loan underwriter you’ve been able to pay rent on time in the past, they’ll at least want to know that you’ve made good on other credit obligations.
This can include credit cards, car loans, student loans, etc. Generally, it’s advised to have at least three of these types of accounts open and active, with a minimum two-year payment history on each.
For example, if you’ve got two open credit cards and a car lease that have all been open for 24 months, you should be looking good in the credit category. Simply having the accounts open and in good standing is enough.
If you lack rental history and credit history, it’ll just complicate matters when it comes time to apply for a home loan, and it might require you to use a co-signer to get the job done.
Some other good tips to keep in mind prior to getting approved for a loan are:
- Save for a Down Payment While You’re Saving on Rent
- Consider the down payment on the house
- Cash reserves for future monthly housing payments
- The closing costs associated with the mortgage
While you’re building your credit in the background, you should be focusing on saving up for a down payment on your purchase. You should aim to put down at least 5% and more.
Having more money to put down is also critical in today’s very competitive housing market, with bidding wars all too common. Home sellers won’t be very impressed if you can’t even muster 3% down, and even then, they might pass you by.
If you go with an FHA loan, you’ll need a little less with only 3.5% down payment.
However, it is possible to use gift funds with these loan programs, so technically you could come in with none of your own money and still move out of your parent’s home, assuming someone is willing to help you.
But again, try to strive for better here. Doing the bare minimum isn’t exactly putting your best foot forward. And if you put less down, you’ll wind up with a higher mortgage rate and higher payment.
For more information, call us directly 833-403-8230