If you’re looking to get on the property ladder and become the proud owner of your first home, you might assume that one of the biggest barriers to entry will be the size of your down payment.
While it’s true that lots of lenders will look for a large deposit before approving a mortgage application, it is possible to find a good deal even if you don’t have a huge hoard of cash to fall back on. Here’s all you need to know about your options as a first-time buyer.
Make use of government-backed schemes
There are various federal and state-level initiatives which are geared towards assisting people to purchase their first property, so it’s worth investigating whether you’re eligible for any of the programs that are available at the moment.
This includes schemes that are targeted at specific groups, such as service members and veterans, as well as people living in rural areas.
Boost your credit score
There are various ways in which having a good credit score will work in your favor, one of which is by giving you access to the best possible mortgages from reputable providers.
People with the most immaculate credit histories will be seen as attractive prospects by lenders, and so you could be in with a shot of securing an affordable deal even if you only have a small deposit to your name.
If you aren’t checking your credit score regularly, then this is a habit worth getting into, as it will improve your prospects for all sorts of financial products.
Check out mortgage deals online: as low as 3% down for first-time buyers
Connecting with a low-interest mortgage is easier if you look for the best deals online via sites like SoFi, because there’s a huge amount of competition in this space, and lenders will want to snare new customers with juicy offers.
For instance, while you might normally expect to need at least a 5% deposit available to get an offer in principle from a mortgage provider, online deals can accommodate first-time buyers with down payments of as little as 3% of the property’s value.
Start saving or reconsider your choice of property
The thing to remember about the size of your deposit is that it’s actually a relative concept; the more expensive the real estate you want to buy, the smaller it will be as a percentage of the property’s value, and vice versa.
So if your deposit is too small to buy your dream home right now, you’ve got a couple of options. Either you need to start saving so that your deposit grows bigger, or you need to look for a more affordable house in the interim.
Both routes will mean deferring the acquisition of your dream home to a later date, and while it might feel frustrating, it will be worth it in the long run.
Getting your foot on the bottom rung of the property ladder is better than paying rent indefinitely, particularly because house prices can climb quicker than it’s possible to build up a deposit.
Appreciate the drawbacks
It’s necessary to note that mortgage deals that accept buyers with smaller deposits are usually less attractive in terms of the amount of interest that’s levied against them.
Putting less money down means that you’re a riskier prospect, and so lenders tend to hedge their bets with higher rates.
That doesn’t mean a mortgage of this kind won’t be affordable; just look at your monthly budget and ensure that the repayments will be manageable. And with that, you should be ready to start your search for a compelling mortgage deal!
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