Despite the country's current low mortgage rates for a 30-year fixed-rate, renters in the U.S. do not take advantage of this situation to buy their first homes.
Melissa Allison of Zillow says there are valid reasons why renters don't buy homes, citing the recent Zillow Research Survey.
These are the renters' 5 major reasons based from the survey:
1. Can't Afford Homeownership Costs
Majority of the renters, 18 percent, told that they simply can't afford the fees involved in owning a house. These include property taxes, closing fees and general maintenance cost of the house. This reason is actually a valid one.
Remember, in our presious report, it is not just the mortgage payment per month you have to consider in buying a home. Paying property taxes is mandated by law. New homeowners should also pay for the commission of their real estate agent. Appraisal fees, lawyer fees,and inspection fees may also be a part of the closing costs.
Aside from that, it is your sole responsibility to take good care of your home and do the necessary repairs to maintain its livable condition for your whole family. Other related fees like association dues and insurance fees must be settled regularly.
2. They Don't Qualify for a Home Loan
Sadly, 16 percent of the renters surveyed thought they just could not qualify for a home loan.
If you think you may not qualify or be pre-approved for a home loan because of low credit scores, Zillow suggests to improve them. You may cut down on your debts and also correct errors on your credit report to make lenders see you as good candidate for a home loan.
3.They Won't Stay Long in Their Current Homes
Fourteen percent of renters say that they will not be staying in their current location long enough. However, renters must know of their breakeven horizons, Zillow Chief Economist Stan Humphries tells CNBC.
Allison notes that in the Detroit area, the breakeven horizon is 1.3 years. In major cities like New York and Los Angeles, the reported breakeven points are 3.4 years and 5.1 years, respectively.
4. Don't Have Enough Savings for a Downpayment
Some of the renters, 13 percent of them, said that they just don't have enough money for the required down payment.
Downpayment for a property may be around 20% of its value says SFGate, which is really a big amount to save on. You may check if you are qualified for lower downpayment from Federal Housing Administration requiring 3.5 percent only or Veterans Administration home loan for active or retired military with no down payment needed, adds SFGate.
5. They Receive Government Assistance
A small portion, 6 percent of the repondents, mentioned that they receive government assistance for their rent that alleviate their situation. Find out if you, too, can avail of this service via the U.S. Department of Housing and Urban Development website.
