Overcoming 4 Common Misconceptions and Turning Renters into Homeowners

The American dream may look different for everyone, but ultimately it comes down to finding prosperity, and upward mobility for yourself and your loved ones. When it comes to building generational wealth, home ownership is one of the most viable paths, but for many, the notion of buying a home seems like an impossibility.

We know there are a lot of circumstantial barriers to homeownership – areas that suffered from discriminatory redlining practices, ongoing socioeconomic challenges, stagnant wages and more. However, there is also a category of barriers that are more easily overcome that have to do with misconceptions about the home buying process. Renters are often convinced that they’ll never be able to own a home for several reasons:  they don’t have the credit, they haven’t been employed at their current job long enough, or they’ll never be able to come up with the cash for a 20% down payment. Moreover, they may be the first in their family or social circle to consider home ownership, and it feels beyond the realm of possibility – like being the first one to go to college. While all these things can hold a person back from even thinking about purchasing a home, in reality, none of them are impossible to overcome. At Atlas Real Estate, our goal is to help people from all walks of life leverage real estate as a platform for building long-term wealth. Overcoming these common misconceptions is step one in our process of educating renters on their path to homeownership.

My Credit Score is Too Low
Yes, credit is a factor in qualifying for a home loan, however, many people aren’t aware of how quickly they can overcome this barrier. First off, it’s important to know that you can qualify for some mortgages with FICO scores under 600. It all depends on what type of mortgage you apply for. For example, most FHA and VA loans will accept FICO scores as low as 580. Some FHA loans that require a 10% down payment may go even lower depending on the lender. Conventional mortgages typically require higher credit scores, but many lenders will approve loans with a minimum score of 620.

If you have a credit score lower than 580, there are tools and resources available to improve your numbers. The first step is finding a lender you can trust to review the current state of your credit and evaluate immediate steps to take. This could mean paying down existing credit balances by contributing more than your minimum payment each month, asking for limit increases, or checking your credit report for errors negatively impacting your score. Work with your lender to determine what you can do right now to make an impact on your credit within a few months’ time.

My Employment History Is Weak

The level of employment history to qualify for a mortgage is really flexible right now. A common misconception is that you need to be working for your current employer for at least two years before you can qualify. That’s not the case. Right now, anyone with a W-2 job is likely to qualify, and many self-employed individuals are eligible as well. People also tend to worry about recent employment gaps, especially given the impact the pandemic had on so many people’s careers. However, as long as you’ve been with your current employer for at least six months, you may be in good shape.

The bottom line here is: Don’t let your assumption stop you from trying. The worst that can happen is you have to wait a few months to build longevity with your current employer and improve your credit scores. Don’t let perceived obstacles stop you from going after your goals.

I’ll Never Have Enough Cash for a Down Payment
We know one of the biggest barriers to homeownership is coming up with a down payment, and most first-time buyers won’t even attempt to purchase a home because they believe they don’t have enough cash. According the Urban Institute’s 2019 Barriers to Homeownership Report, 68% of American renters see the inability to save for a down payment as the leading obstacle to homeownership.

The reality is that you don’t need to put the traditional 20% down to get into your first home. Most lenders will approve a conventional loan requiring just 3% down for first-time homebuyers.

Now, with today’s escalating home prices, 3-5% of a $500,000 home is still a daunting number for many first-time buyers. The Urban Institute’s same report also found that only 23% were familiar with down payment assistant programs that can help cover some or all your down payment and closing costs. The National Homebuyers Fund (NHF), for example, has down payment assistance programs available that can cover up to 5% of the loan as a gift or a forgivable second mortgage. The Colorado Housing Finance Authority (CHFA) has its own program that will provide up to 3% of the loan amount to cover down payment and closing costs, and in California the Golden State Finance Authority’s Open Doors program will cover up to 7% of the loan amount.

And here at Atlas Real Estate, we recently launched our Uplift program specifically to address the daunting issue of amassing a down payment. The program provides resources and a number of tangible savings opportunities – like limited rent escalations and one month of free rent – for renters to take advantage of as they pursue their goals of saving for a down payment.

I Could Never Own a Home

The last misconception is probably the most disheartening. Home ownership feels entirely out of reach for many people. Often, their families have never been homeowners, and they don’t have anyone in their social circle who owns a home to offer guidance. It’s possible, even probable, that they have encountered so many roadblocks in life that the idea of home ownership is inconceivable. This is a cycle that needs to be broken.

The homebuying process can be a complicated journey, but there are resources and tools out there that can help eliminate doubts and fears. From financial literacy to homeownership 101, we offer a variety of free webinars at Atlas, but we’re not the only ones who do this. Many state housing agencies have free educational programs available to first-time homebuyers. Information is power and help for first-time homebuyers is more available than ever.

The American Dream of owning a home should not be an exclusive journey. If we want to see real change that helps end the cycle of poverty and build generational wealth, we must make home ownership more attainable. More needs to be done to reach and uplift individuals who have historically been left out of the pursuit of generational wealth through real estate. We know our efforts at Atlas can make a difference, and we will continue improving our programs and exploring new opportunities to solve this real-world problem. We hope to see more owners of rental real estate stepping up and identifying ways they can contribute to making homeownership more attainable as well.

Tony Julianelle is the CEO at Atlas Real Estate, a Denver-based residential real estate brokerage and property management company with offices in eight markets nationwide and a mission to uplift humanity through real estate. Atlas aims to help more people build generational wealth by helping renters become homeowners, homeowners become investors and investors provide safe and affordable housing within their communities. With more than 20 years of experience in real estate and financial services, Tony is passionate about developing people and serving customers. He is a consultant to various business partners, focusing on strategy, execution, and bottom-line business results. Tony has also served on several boards including Mortgage Bankers Association of Kansas City, Colorado Mortgage Bankers Association, Habitat for Humanity and Park Church Denver.