If you are a first time home buyer, or simply in the process of buying a new home for the first time in awhile, you may find that your budget is making it difficult to find the home of your dreams. Although it is a little harder, that tiny budget does not have to make it impossible for you to own a great home. It just means you have to shop a little smarter!
Before you begin your search, make sure you’ve done some homework. First, check your credit report to know where you stand and to ensure there are no inconsistencies on it. After all, even a tiny mistake could hurt your chances of receiving a loan. If your credit report is accurate – but doesn’t look very good – take some time to improve it before you apply for a loan. If your credit isn’t strong and you have a very small budget, it will be very difficult to get your hands on a decent home!
But there’s more to take into consideration besides your credit. Banks also like to see longevity in your career. In fact, they prefer that you have at least two years with the same company. Your lender is also going to want to know where your down payment will be coming from. If you are receiving the down payment as a gift, be prepared to provide evidence that you will not have to pay it back. Also, banks don’t always broadcast this information, but they prefer that a married couple has been married for over a year when considering them for a loan. Even if you are approved for a loan, your best bet on a small budget is not always the typical home purchase. Other options that may be appropriate for your budget are rent-to-own homes, purchasing a condominium, or purchasing a REO or Bankrupt Property.
Each one has pros and cons, though…
Rent-to-own options can be a great option for wannabe-homeowners on a small budget. In this scenario, you seek out someone who is willing to rent or lease the home to you for a certain period of time, and after that time is up, you have the option to purchase that home with the rent going toward the down payment or the purchase price. The monthly rent payments are higher in these situations, though, because they help to pay for the down payment.
If that option doesn’t appeal to you, how about a condo? You can typically find a condo for less than the price of a single-family home. Condos are also sometimes a better choice for first time buyers since the lawn care and landscaping are usually handled by the Condo Association. One important thing to consider, though, is the Condo Association fee, because it can drive up your monthly expenses – so make sure it’s worth that extra cost!
REO properties refer to Real Estate Owned properties, or properties that the bank couldn’t sell at the foreclosure auction. There are opportunities to get a good deal on these properties, but make sure you do your homework. Foreclosures aren’t always a good deal, even though the price tags on them can be a lot lower than market value. In some cases, though, they need a lot of work – and that work adds up! Buying a home is something most Americans want to accomplish. Even with a small budget, it’s not impossible to make that dream a reality. The best thing you can do is to properly prepare and research all of your options before taking that next big step.
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