CNBC reported that an estimated 7.9 million renters were actually “income mortgage ready” — meaning they were qualified and could have bought a home — according to an analysis of the 2022 American Community Survey by the U.S. Census Bureau.
While some of those folks likely chose to rent instead of buying, many of them might not have been aware that they could qualify for a mortgage, and would have chosen to buy if they’d simply gotten pre-approved and knew they could.
If you’re currently renting, but would love to buy a home of your own, here are 4 things that may be keeping you from knowing that you’re “mortgage ready”:
1) Fear of Rejection
Nobody likes getting rejected, so it’s understandable if you’d rather not open yourself up to the heartbreak of being told you’re not qualified to buy a home!
But you might be underestimating your financial stability, and overestimating the strictness of mortgage requirements. Lenders certainly have requirements you’ll need to meet, but they also have various programs to accommodate different financial situations.
Look past your fear of rejection and reach out to a lender to get pre-approved!
2) Not Feeling Worthy
If you grew up in a home that was owned, you’re more likely to own a home. While there are many aspects to why this happens, a major factor is due to what is called “an intergenerational transmission of status,” according to this CNBC article.
So if you grew up as a renter, perhaps you just feel like that’s what you’re supposed to do, or that homeownership isn’t something you can aspire to. While people who grew up in a home that was owned may be more likely to buy a home, there’s nothing saying you can’t just because you grew up as a renter.
3) Thinking the Approval Process Is Too Difficult
Getting approved for a mortgage probably sounds like it’ll require a lot of paperwork and documentation, and take a lot of time.
While the actual process of applying for a mortgage, going through underwriting, and getting the final approval can require some time, documentation, and patience, getting pre-approved may only take you a few minutes! In most situations, a lender can tell you whether or not you qualify for a mortgage, and how much money they’ll approve you to spend, just by giving them a call and giving them some basic information.
4) Assuming That Renting Is Always Cheaper Than Buying
A common misconception is that renting is always the more affordable option compared to buying a home. However, depending on your area and local market conditions, buying a home can sometimes be more cost-effective than renting. In addition, homeownership allows you to grow your net worth by building equity, and can give you potential tax advantages.
Don’t just presume renting is more affordable, ask a local real estate agent to help you conduct a cost comparison between renting and buying in your area. And if you want to get the bigger picture, ask a tax professional and/or financial advisor for their thoughts on how owning a home will help you grow your net worth, and for any tax incentives it may offer.