There is a small percentage of homebuyers that are bucking the trend and saving money and building up their credit obtain a better loan while their friends and co-workers continue to struggle.
Homebuyer Loan Approval
It has been true for as long as I have been a real estate agent in Idaho that the Homebuyer Loan Approval process has not changed much. By this I mean most homebuyers will do the minimum required to obtain a loan approval. If they hear one can be approved for a mortgage loan with a 620 credit score and obtain a grant for the down payment with the seller paying all their closing costs they are thrilled and think they hit the jackpot.
What the masses are doing
A young couple may hear from another couple that they purchased a home with no money down and are thrilled. In their excitement this young couple finds out what they have to do to qualify for that same kind of loan. And the cycle goes on and on.
We are a society based on credit and many make the mistake of getting caught up in obtaining too much credit and debt and then struggle when they decide they want to purchase a home. They end up seeking down-payment assistance and closing costs paid by seller because that is what all their friends and co-workers are doing. It is accepted as the norm.
New Breed of Buyer
There is a new breed of homebuyer that is saying they want to break this cycle of doing what the masses are doing. They have discovered if they save money and have a nice next egg they are off to a great start. Also, instead of settling for the minimum credit score of 620 they are striving for a 700+ credit score. On top of that they have never been late on payments and they have never co-signed for anyone.
When these buyers do shop for a home they don’t obtain the maximum loan they qualify for. They buy below the maximum amount they are qualified for so that they are not stressed out by a big mortgage payment. They know this home is not their last purchase and is a stepping stone to their next purchase.
Any lender will tell you that homebuyers like this that have saved money, have a 700+ credit score and handled their money wisely will qualify for a great mortgage which includes a lower loan rate. Why? because mortgage loan underwriters view buyers like this as a great credit risk, being less likely to default on a mortgage loan.
A New Way of Thinking
Just because there are grant programs out there that will grant you the money for the down payment it does not mean this is the best route for you and your family. I guarantee you that 99% of people in this country could save $100-$200/month if they just cut out all the Mocha Coffees, dinners out and need to own that “bad” pickup truck.
When you walk into a mortgage lenders office and they know you have saved a few thousand dollars and have a 700 credit score they will fall off of their chairs because this is not the norm because most homebuyers need credit repair and are doing the bare minimum.
You will walk out of that lenders office with an approval letter and mortgage rate that will astound you. More than that you will be proud that you didn’t accept what the masses are doing and did what grandpa and grandma had to do and you will be filled with pride for accomplishing what few accomplish.