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I would suggest that you qualify that objection before you try to answer it. Make sure it is the real objection because it may be just a smokescreen. Ask them "If I could show you how a home could be affordable, would you be interested?". If the answer is yes, you have a lot of great options from the answers above. If the answer is no, there is something else preventing them from buying. Find the real reason, and answer that.
San Diego, CA
I try and discern why not. If they tell me they are unemployed with a 400 Credit Score and no money they are probably right. But there may be some circumstances another lender could work with, or maybe they have not even spoken to a lender and they might be able to. I point out how with Tax savings it may be cheaper to own. I also point out that a 30 year loan will fix their housing cost, but rents keep going up.
No one is addressing the elephant in the middle of the room - they don't have the downpayment. A lot of renters simply don't have the savings or someone who can provide gift funds or they make too much to qualify for downpayment assistance.
Add to that the lifetime FHA mortgage insurance for low downpayment scenariois, no wonder folks are renting.
Equity, tax savings and all the good news of home ownership don't replace the simple economic reality that one ought to have some skin in the game to qualify for a mortgage.
Some people I know are just going back to old-fashioned budgeting and saving for their downpayment. Nothing wrong with doing that.
In Boise Idaho, rents are typically higher than mortgage payments, so I tell them that I can pretty much guarantee they can afford a mortgage since they are already paying one . . . for their landlord!
Sometimes if they sit down with a lender they will be surprised to see that they can buy a home. You can tell them there is no obligation but would they like to sit down with a loan officer.
So you can afford some one else's mortgage?
I tell them about the great down payment assistance grants, the 97% Home Finance Agency and 100% USDA and VA loans. In most instances, the grant will cover all of the closing costs. If they cannot afford to buy a home, it is not about the payment. It is more likely about excessive long term debt.
You might remind them that they already are paying a mortgage - plus profit, plus an allowance for vacancies, plus a repair allowance - but they're doing it for the landlord.
Then show them the real numbers that would relate to purchasing a home similar to the one they're renting.
I don't think I have ever heard that objection before given the rental market here; however, I sometimes hear the opposite objection, e.g. "we just can't afford the landlord rent increases any longer and have decided to buy a home to lock in our monthly house expense".
Affording a mortgage is SIGNIFICANTLY different from affording a house.
People are well aware that one bought with an illness turns the American Dream into an American Horror Story.
I was recently asked to put on the Realtor hat for someone "interested" in knowing what it takes to buy a house. A little annoyed by the question from an aquaintance who was literally interested in picking my brain for undetermined amount of time, I responded by turning the tables on the questions.
How long will it take you to get your credit worthy?
How long will it take you to bank at least $4 - $5,000 that you won't need for day to day expenses? (If the Hotwater heater, fridge, furnace and plumbing 'go-out' you're gonna need some money.)
Can you afford to pay for more than one appraisal and home inspection should your contract fall apart?
*SILENCE* "Well, I guess I need to get my thoughts together", and not another word was mentioned about what does it take to buy a house.
There are people who are READY, WILLING AND ABLE to purchase. I don't think having an intervention to CONVERT a renter into a homeowner is in the best interest of the renter. Obviously only relevant if "What Happens After The Sale" is of any consequence.
Often it's the fear of making a long term commitment. Empathize with the prospect. "I know how you feel, many of my clients felt the same way, however after looking at the actual numbers here's what they found". Pencil out the current rent payment vs. the proposed mortgage payment. Show them how subtracting the interest, and property tax write off will lower their taxable income, which can save many hundreds of dollars per month. Show them how they can increase their monthly take home pay by adjusting their witholding on their w-4 form at work. Point out the additional benefits of not worrying about the sudden notice that landlord is selling the house so they have to move. Depending on the economy, the chance of appreciation, or retiring with a home that is paid for. Ask them if what you explained makes sense to them, and if buying a home now sounds more like something they want to do.
I have not worked as a lender for years but you only have a few hard answers.
may look at a better paying job, a second job or move in with Mama and Papa.
I did have two firemen purchase a home together as long as you get along. this was a great opportunity that came from two renters who wanted to be homeowners. they lived or rented together already so it was a no brainer..
Like most agents I would refer them to a trusted lender who can review their ability pay, history and goals. You never know!
A local realtor has asked me if I would like go together to put on monthly home buyer workshops. The idea came up when someone called her about one of her listings and asked if it was for rent. The realtor told her it was not for rent and only for sale. Then she asked if the person had thought about purchasing rather than renting and the caller said she had not even thought of that option. Now the caller is well on her way to home ownership.
We tell them, "But you already are paying a mortgage - just not yours!" Then we proceed to tell them the advantages of buying over renting. Of course, they may have a legitimate reason to rent for a while before they buy, but that reason usually comes out with some well placed questions.
You're absolutely correct, you probably can't afford to buy a home now. The question now is, do you really want to own a home in your future? If their reply is yes, I simply tell them that I can help them own a home by creating a plan, so would they trust me to help them.
I say that must love their parents, because that's the only way I know to get out of paying rent or a mortgage.
Ah, I get that each in my calling campaign. Hint: get a Loan Officer with an assistant that is highly organized and watch the future pull through...
Hi Inna good topic, I have a buyer right now that said that same thing to me. I set them up with my lender and we are looking right now. Some will find that they need to clean a few things up but most very definitely can start the home hunting process.
This all depends on the context. If a person who says they cannot afford to buy is only planning on living in a place for a short while or they are not at least fairly certain, they are probably correct. I usually recommend that those who are fairly sure they will be staying in one place for five years definitely look into buying.
I would tell, "You are right, you likely can not afford a mortgage."
Then wait 15 seconds. Not 5, not 9, not 11, but 15 seconds.
"Between the age of 20 and 35 is when the most significant strategy to secure a comfortable retirement is created and implemented. The reality is most citizens only have one chance to make a grap at this ring. It is the money created during that time that makes the greatest difference. It is important to share with you just how that works and the incredible magical power of interest and the role ownership plays in that magic."
At the conclusion of the discussion the citizen will understand they can not afford to not do all that is necessary to afford a home. Find their overreaching goal or value and how this may prove to be a solution to many things.
Then how do you afford to pay rent?
I ask them if I can ask them some questions and then start qualifying them.
Hi Inna -- I ask them some questions. How do you know? Have you spoken to a lender? Do you want to buy a home?
Like Debbie Reynolds I ask them about their current situation and why they believe they cannot buy. Then just address the issues one by one. Sometimes they are right and they cannot buy or maybe they should not buy. However, they may just have been misinformed. A little education goes a long way. Always rewarding, like Debbie Laity mentioned, to see a renter become a homeowner.
I would have them talk to at least 2 lenders, they might be pleasantly surprised!
I do have this discussion with a lot of renters. It does depend on their situation. Recently I sold a home to a couple that will save $200/month for owning their own home versus renting. Talk about a happy closing.
It depends on what they are paying for rent and what they think they need in a home.
They may be correct. Though, if you show them the costs of owning, they may see it differently.
depends what is the rent Inna and the area they are renting vs what they actually could afford ,i try to turn renters in to buyers but they need to see a benefit ,have a great day
I ask if they have tried and how long ago. It may only be a matter of not much down payment and not the monthly payment. We know programs that can help them get into their own home
I ask what they are paying in rent. Then I tell them about what they could afford if they bought a house with that money going toward mortgage, mentioning the tax advantages, etc.
They are nice! They take care of others before their own!
If they don't have the down, a down payment assistance can help, perhaps research any conventionally priced properties that can go USDA -
If someone is a w-2 earner they have tax benefits