Accounting & Finance
Home Ownership For Low Earners: Is It Still Possible?
In all honesty, there’s no getting around the fact that buying a house can often seem like a privilege for the privileged. If you have money, either from your income or family, homeownership is easy enough to achieve. Some privileged individuals even go as far as buying many properties to either rent out or use as holiday homes.
By stark comparison, low earners are often stuck paying extortionate rental rates, with no prospects of owning a home soon. An average deposit is now simply out of reach for many families. It’s a sad state of affairs and one which can stop many low earners from even aiming for this goal. After all, even if they did manage to save for a deposit, they’d struggle to get mortgage approval. It’s no surprise many such individuals don’t even attempt the task.
In truth, though, hard work and determination could secure homes for low earners. There’s no denying that it can often seem unfair when other people get their houses with so little effort. But, working hard will only increase the satisfaction of your home in the long-run.
So, if you thought you’d never have a home to call yours, it’s time to think again. Here are some tips which could help low earners hit the jackpot when it comes to homeownership.
In case you hadn’t realized already, you’ll be playing the long game. There’s no pretending that you’ll have a house in the next year, or even two. It’s highly unlikely. But, a five-year plan is much more achievable. Either way, you need to be patient when it comes to saving for a deposit. The amounts you need aren’t going to appear in your savings overnight. Instead, you’ll need to save for a fair amount of time. Worse, you’ll probably need to do so while a lot of your money goes to rent. It won’t be easy, but it is doable, and sites like time.com can help you achieve it.
To give yourself a boost when your patience wears thin, it’s worth developing a plan. That way, you’ll feel as though you’re working towards a set goal. Without this, it’s all too easy to get lost in the process and lose momentum. Instead, use one of the many online mortgage calculators to estimate how long it’ll take you to save enough at your current rate. Then, work with that time frame in mind. It might be three years, or it might be seven. All that matters is you have an end goal in mind.
It can help to know the right people
With the deposit taken care of, it’s time to worry about the other primary concern for many low earners – will you be accepted for a mortgage? In an ideal world, the deposit would be all it takes to get a mortgage behind you. But, that’s not the reality. Instead, mortgage lenders and banks look at your income and lend to you only based on that and your deposit. So, low earners often struggle to get accepted even after the saving process. Or, to put it more simply, a lender just can’t risk the amount necessary for the house you need. They won’t refuse you, but they won’t be in a position to make you a realistic offer.
The good news is, there is a clear and simple way around the problem. At least, it’s simple for some. Guarantor backed mortgages save the need for a high income. Instead, somebody with the finances to do so takes the fall. If an appropriate guarantor signs on the dotted line, a mortgage lender can then provide a much higher sum. And, you can finally buy your home.
Bear in mind that this is all about who you know. Not everyone’s willing to take a risk like this. Your best bet would be to appeal to family members, who know that they can trust you to meet your payments. After all, a guarantor only has to pay out if you default. Bear in mind, too, that they need to have the collateral it takes to get accepted. Approach individuals who own their homes, or simply have enough income to cover the costs.
Clear your name
Those on the low end of the pay spectrum often turn to options such as credit cards or loans. It’s a devastating issue which needs addressing, but before the world takes note, you need to. If you have various debts to your name, you’ll find it near enough impossible to get accepted for a mortgage. In fact, paying out massive amounts of interest could even stop you from having money left over for savings.
To make sure your debts don’t destroy your chances of homeownership, head to sites like DebtConsolidationUSA.com to find out about your options. Consolidation companies like these will work with you to develop a plan to clear debts fast. All the better for clearing your name before the black mark sticks.
If you don’t have debts to deal with, you should turn your attention to building a credit rating. This will be a sure sign to future mortgage lenders that you can handle your money. The issue is, no credit rating is just as much of a black mark as a bad one. And, a bad one isn’t good when it comes to gaining mortgage approval. So, the first step should be to get yourself a credit card. It’s also crucial you set up a direct debit so that you never miss a payment. Then, it’s as easy as putting certain affordable expenses on your credit card and paying the amount off in monthly instalments.
Research the help available
It’s also important to note that there are help-to-buy schemes out there for low earners like yourself. Something like the USDA loans found on https://eligibility.sc.egov.usda.gov would allow you to get a home loan without a deposit. FHA loans are similar, though they do need some down payment. For the most part, though, that’s rarely more than 3.5%, so it’s much more achievable than traditional avenues. Both these options, and many others, are explicitly designed to help low earners onto the housing ladder. But, a shocking amount of those eligible don’t even know such help is out there. For the most part, this goes back to the issue that many low earners don’t even realize home ownership could be on their horizon.
If you weren’t aware of these assistance options, it’s time to do your research. Luckily, a quick online search will lead you to the websites for a variety of options. Bear in mind that, when borrowing any money, it’s essential to cover all bases before you accept anything. Read up about each option, and weigh up which would be the best fit. Then, read the small print to make sure you wouldn’t end up paying over the odds if you went down your chosen path. For the most part, option for methods aimed at low earners is a pretty safe bet that you’re in good hands. It’s also worth noting that many of these loans have limits on the amount you can earn and still be eligible. Use the online checks available on such sites to make sure you fall under the right earning bracket. Otherwise, you could be in for a disappointment.
Keep an eye on the market
It’s also worth noting the importance of keeping an eye on the market. House prices change all the time. Sadly, most of those changes involve rising prices. That said, it wouldn’t be unheard of for the housing market to drop all of a sudden. Either way, it’s important you watch what’s happening so that you can keep on track. A major worry for many low earners is that the protracted nature of their saving process could leave them unable to buy, even once they reach their goal. After all, if saving takes you seven years, house prices and deposit amounts are sure to be even higher. Worse, the inflation on property rarely reflects any wage rises seen by the general population.
It can be disheartening, for sure. But, by keeping an eye on what’s happening, you can continuously adjust your plan to suit the market. As such, you won’t have a sudden shock when you reach your projected deposit amount, only to find it’s no longer enough. Keep an eye on things will also allow you to act if house prices suddenly plummet. Everything, from politics to climate, dictates costs. If these things change, which they often do, you could find yourself ready for buying much sooner than you thought. Wouldn’t that be something?
A final word
As you can see, every step of this process requires hard work and determination. There are many barriers you’ll need to get past before you can own a home. Hence, it’s important to consider whether the end goal is worth the work you’ll put in. If the answer is yes, then it’s past time you got going!