Here are a few reasons you may not want to borrow or cannot borrow
- The payment has become higher than anticipated
- The interest rate has become higher than you had planned for
- You didn’t factor in interest, taxes, insurance, HOA dues, or other long-term costs
- The full financial picture has made you more aware of financial problems
- Borrowing this money would prevent you from other investments or enjoying a balanced lifestyle
Even with all of these revelations you may still want to buy a home, but you will need to figure out another way to do so without borrowing quite as much money.
Here are three options on how to lower the cost of a home loan
Increase the down payment
Putting more money down and upfront would be the ideal situation. If you are uncomfortable borrowing 80% or more of the cost, you can try to find ways to increase your down payment. If you have any assets such as stocks or bonds then you could potentially sell them. If you have a 401(k) you could borrow against it or perhaps you have another retirement account you could borrow out of. Maybe you have a relative who you could ask for help in the form of a gift.
Even with these options there is always an assumed risk. Long term you would want to make sure that your financial security would not be at a detriment if you are borrowing out of a retirement fund. Selling off stocks and bonds could hinder your ability for greater returns in the future. Receiving a gift from a relative is nice, however, some people don’t like the feeling of owing something to someone, especially family. You must exercise caution when reviewing any of these options and proceed only if you are comfortable in doing so.
Buying less home
Not many buyers like hearing this one but you have to come to terms with reality when you are going to buy a home. If you lower your target price range then the amount of money that you will need to borrow will decrease significantly. A less expensive house can also give you a better chance at building equity faster.
Today’s housing market in San Diego has sellers in the driver’s seat. So, it is unlikely that this would happen, however, it is not out of the realm of possibility so it could be worth a shot. You could get the seller to pay for closing costs, pay for fees or even buy points to lower your interest rate. Seller concessions can help you save a significant amount of money. A thing to keep in mind, however, is that you’re paying interest in the full amount of the loan, even if the seller refunds some of the money to you in the form of a concession. This is so because you are still purchasing the house for the listed or agreed upon price and the lender does not care about the concessions only the amount that the home has been sold for. As stated earlier seller concessions are unlikely in the San Diego housing market today but if you find a seller in a dire need to sell or a home that has been sitting on the market for quite some time then you could possibly get some concessions.