This Valentine’s Day, after you’re done shopping for sentimental greeting cards and eating handfuls of boxed chocolates, remember that regardless of your current financial situation, you should be able to buy a home later on down the road, thanks to your admirers in the U.S. government. But this will only happen if you also do your part and start making yourself creditworthy enough to purchase a personal residence.
The U.S. is one of the most homeownership-friendly economies in the world. And hard as it may be to believe sometimes, most U.S. politicians truly do want U.S. citizens to own homes. There are many ways that the government helps you on the road to homeownership. First, there are the government-sponsored mortgage companies Freddie Mac and Fannie Mae . Ever since their creation decades ago, their primary mission has been to reduce the cost of financing a home for buyers like yourself. This is part of the reason why mortgage loan financing has generally hovered between 4.0% to 6.0% annual interest on a 30-year loan for the past few decades. In addition, 30-year loans are currently at about a 4.0% annual interest rate, which is the lowest in their history.
Fannie Mae and Freddie Mac are effectively part of the U.S. government, which essentially guarantees the mortgage loans that banks give buyers to finance the purchase of real estate. Since banks have this guarantee, this lowers their risk on the loan so they can offer less expensive financing options to buyers like yourself.
The government further decreases your cost of housing by making your mortgage interest and property tax payments tax deductible. This effectively lowers many individuals’ interest rates on their loans, which allows you to buy a more expensive property. You've probably heard in the news lately about the home mortgage interest deduction and how it may be eliminated. Not to worry, it is highly unlikely that will happen, and certainly not for the average American homebuyer.
Finally, direct government entities like the Federal Housing Administration (FHA) sometimes allow borrowers to put down 3.5% or less to buy a home, and sometimes borrowers may even put down almost nothing. This is huge help to people who are steady income earners and otherwise creditworthy individuals, but who just can’t seem to save a downpayment for buying a home. Few other countries offer this type of option.
But just like any relationship on Valentine’s Day, you need to do your part to make the potential helping hand from the government count. You see, even with all the help the government gives you to buy a home, you still need to do a lot of work on your end. You will need to hold a consistent job for a few years in a row, save some money for a downpayment, keep your borrowing to a reasonable level, keep a good credit profile, and pay your bills on time. All of this should ensure that your credit score should be in good standing when you’re ready to buy a home. As you can see, the best Valentines Day present possible, homeownership, is within any hard working American’s reach.
And Happy Valentines Day!
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