Obstacles to home-ownership have reached such mythical proportions that many prospective home buyers believe it’s futile to even try! Fortunately, many of these perceived obstacles have little or no basis in reality.
After hearing many of these misconceptions from home buyers and real estate professionals alike, let’s take a moment to dispel these myths:
- MYTH: Home buyers must put 20% down. Lower down payment programs require an FHA mortgage. (And Realtors hate FHA mortgages.)
FACT: There are plenty of conventional programs that allow a down payment as low as 3% of the purchase price. There’s even a program I’m using which allows for as little as a 1% down payment from the buyer, with the lender granting an additional 2% of the purchase price towards the down payment!
Many times, these conventional loans offer a lower payment than FHA; and the Realtors need not worry about an FHA appraisal.
- MYTH: Buyers must have excellent credit or very little debt to qualify for a mortgage. Buyers with late payments or large debts such as student loans cannot buy a home.
FACT: While home buyers don’t need excellent credit, they should NOT have terrible credit! What’s important is the borrower’s credit personality. Anyone can make a mistake; and some scattered late payments will not disqualify a borrower from obtaining a mortgage. However, if a borrower’s credit report reflects the borrower’s inability to manage credit – or lack of responsibility to make payments – then a mortgage approval could prove difficult. Along the same lines, if a borrower demonstrates a responsible use of credit and debt, then student loans are not necessarily a disqualifying factor! Conversely, borrowers who live on credit cards and are in debt over their head probably should not be homeowners anyway.
- MYTH: If a borrower just started a new job, they must wait two years before they can obtain a mortgage.
FACT: If a borrower recently became self-employed, their self-employed income cannot be used towards qualifying income until they have been self-employed for at least two years. (And even here, there are exceptions!)
For would-be homeowners who are gainfully employed but are contemplating changing companies or positions, it’s likely you can do so without fear. That said, it’s probably a good idea you speak to me before making the move!
- MYTH: Borrowers claim, “I’m applying to My Bank or Credit Union because they know me, will save me money, give me a good deal, and they already have my information.”
FACT: Mortgage lending is regulated by nation-wide underwriting standards that all lenders must follow. Since virtually all lenders obtain money to lend from the secondary mortgage markets (FNMA, FHLMC, and FHA), the mortgage rate one can obtain will be virtually the same regardless of the lender chosen!
And in New York State, since most closing costs are charged by the state, the local municipality, and by the title company chosen by your attorney, your closing costs will vary little, regardless of the lender.
Your mortgage and your home are likely the most expensive and complex investments in your life. Shouldn’t you seek help from a competent, qualified, and Certified mortgage professional?
Call us for a No Cost, No Obligation Consultation. We will help determine whether purchasing a home is right for you. And if owning a home is in your future, we can ensure your transaction goes smoothly, your mortgage complements your financial plans, and that your mortgage helps you attain your financial goals.
(Inspired by an article written by Danny Gardner, Vice President of Single-Family Affordable Lending at Freddie Mac, Scotsman Guide, February 2017.)
Warren Goldberg is President of Mortgage Wealth Advisors, a Certified Mortgage Planning Specialist®, and a published author. His interviews include Blog-Talk Radio, Newsday, The Daily News, Anton Press, and the Long Island Herald. Since 1992, he’s been sharing his financial knowledge and wealth-building strategies, including how to properly use your mortgage as a financial tool. His clients regularly express their trust and appreciation by recommending friends and family call when in need of mortgage, real estate, and financial guidance.