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Numbers Don't Work

What Do You Do If Your Numbers Don't WorkWhat If Your Numbers Don't Work To Get The Home Of Your Dreams?

Don't Give Up! Let's See What You Can Do To Change Your Numbers

The reasons why the numbers don't work tend to fall within  three areas. You may not have enough income to qualify. You may not have enough down payment. You may have dings on your credit. These are the Big Three. Let's look at some strategies you could put into place to change those numbers for yourself.

First, Let's Look At What Is Required To Get A Loan And Buy A Home

You need to demonstrate a solid track record. That means the following:

  • Two years of full-time employment with adequate income. In the Bay Area, it usually requires minimum annual earnings of $80,000-$100,000 to qualify.
  • Consistent income over time. 
  • Knowing that you are going to be in the location for a reasonable number of years such that it would make sense to take on a mortgage.
  • Good credit with a strong record of on-time payments.
  • A 3-10% down payment in the bank.

You can buy your own Silicon Valley homeNot Enough Income To Qualify

If you don't have enough income to qualify for a loan on your own, it's not the end of your dreams of owning a home. It means you have to get creative to get your foot into the door of the real estate market. Here are some ideas on how you might be able to get that starter home:

  • Find a partner in purchasing your first home. This could be an equity-sharing situation where the partner provides the down payment and you pay the monthly payments. You put together an agreement to sell the home in X years (agreed on by both). Once the home is sold, the partner gets their down payment back first. The two of you split the equity gained over the term of the partnership agreement. Your half of the equity positions you to buy your next property without needing a partner.
  • Decide to purchase a "less than ideal" starter home. It may be tiny. It may be a long commute. It may not have fancy finishes. It's probably not in a primo location. Whichever of these tradeoffs you accept can be the beginning of building real estate wealth for yourself. You need to see it as a short-term tactic to advance a long-term strategy. There are no guarantees, but California real estate has historically appreciated at a predictable rate. Understand, however that this appreciation graph line is cyclical with ups and downs. Historically though, the long-term trend line is, and has been solidly up.
  • If spouse is not working, it may be time to change that to advance your financial situation. Perhaps your children are all now in school and it's time for both heads of household to be working for pay. If there are multiple adults in the household, pooling your resources and partnering on a home is a possibility. 
  • Family members not living in the home may want to invest in an equity share. Perhaps parents, aunts, uncles or other relatives are looking for a way to grow their money. It's worth at least having a conversation with them about how this could help them too.

Not Enough Down PaymentDon't give up on your dream of a Silicon Valley home

What do you do if you don't have enough down payment? That doesn't have to stop you from owning your own home. Let's look at possibilities:

  • Equity sharing as described above is a great place to start. Check out family members and investment clubs and see if you can find an interested partner. Of course, your position is strongest if you have all the other elements described above such as full-time employment with adequate income. This could put you on the road to buying your first home sooner than it would take to save the down payment.
  • If you have generous parents with wealth to spare, this may be the time for a conversation. You could angle for an outright gift or do an equity share partnership with them. Parents are often thrilled to help if they can, especially when it's for something that indicates maturity in their child, like buying a home.

That Sweet Home You Want To Buy When You Fix Your CreditDings On Your Credit

This is the time to clean up your credit. Whatever the problem, you're going to want to get your credit into tip top shape ASAP. Why? Because it's one of the most important factors when it comes to qualifying for a mortgage. Bad credit = no loan. Would you want to loan to someone who has a record of not repaying debts as agreed? Unlikely!

Bad credit is not something to be ashamed of. It's happened to most of us at some time in life—no matter how careful we are. Clean it up and put it in the past. Get on with your life. It will feel really great to step up and handle it, instead of letting it fester and make you feel bad. 

No credit is equivalent to bad credit. It's an oddity of the marketplace that someone who pays in cash and doesn't use credit is put in the came category as someone with bad credit. If you don't have credit built up, it's time to get a couple of cards and establish a solid credit record. Use the same wisdom you've used in paying with cash, and you'll soon end up with a nice credit score.

There are times when a potential buyer has a good job and solid work record, but their credit isn't perfect. This can be for a number of "life circumstance" reasons such as bankruptcy due to medical bills, financial problems related to divorce, or death of loved ones. These situations can be fixed allowing you to buy a home once credit is cleaned up. If this is your issue, let's talk. I can refer you to lenders who will help you qualify.

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