If you want to buy a house, but simply do not have the down payment or income you need to qualify for the mortgage you want, there are a few things you can do:
1. Lower expectations
This may sound like a “Captain Obvious” option, but there is a lot that goes into the price of a house. Decide which factors are non-negotiable and be flexible with the rest. If you want your kids in a specific school district you may have to choose a smaller house, one that needs repairs, or one that does not have all the fancy features. If you cannot afford that 4 bedroom, 3.5 bathroom dream house, start smaller and either add on as you can or build equity in a smaller house until you can finance that dream chateau. You can get some great deals on houses that are functional, but dated. You get the idea.
2. Shop for a bank
Many local banks have incentives to help people in their neighborhoods. Do a little comparison shopping to determine which bank(s) specialize in the loan you are looking for. Make sure you check reviews for banks you are not familiar with. Some lenders will make loans, then bundle the loans and sell them to a different lender. which can lead to some of the horror stories you hear about. Find out whether your loan will be serviced in-house or sold.
3. Maximize your spending power
Check your credit report for errors. Pay down credit cards that are affecting your debt-to-income ratio. Start saving as early and as much as possible so you have at least 3% (preferably more than 20%) of the purchase price. You can do this yourself or for $197 I can help you create a Mortgage-Ready Spreadsheet. This includes one in-depth zoom call to discuss where you are and what you want to buy, plus one follow-up call (because chances are you are not going to have all the information for the first call). After the two calls you will have an easy-to-update spreadsheet that shows you everything you need to speak with a loan officer with confidence and that you can plug your dream house numbers into.
4. Consider that renting may be the best option for now
This is not what you want to hear, but perhaps you need a little more time to prepare yourself financially. Renting could be the better option if you are not handy, would be struggling to pay for the mortgage, insurance, taxes, maintenance, and all the other things that go into owning a home. Also, if prices are such that renting is less expensive than owning, you may want to rent until the housing prices go down. Renting is a good idea if you are planning to move in a few years. If you decide to rent with the intent of bettering your financial situation, find the least expensive rental you can in a safe area so you can put even more money toward your down payment savings.