Sunday, 26 March 2017

Don't Let Mortgage Myths Scare You

Written by Posted On Wednesday, 18 March 2015 17:38

The national average for the 30-year fixed-rate mortgage last week was 3.86 percent, according to Freddie Mac's most recent survey. Freddie's Deputy Chief Economist Len Keifer believes 2015 will be a great year, with the highest number of housing sales since 2007. The outlook for 2015 is even better, assuring almost instant equity if you purchase now.

Keifer names several reasons why Freddie Mac is optimistic:

1. Jobs have grown at a rate of 250,000 per month for over a year, with strong job growth in the first-time homebuyer age group.

2. About 80 percent of metro markets are affordable for the median family income to purchase the median priced home.

3. Rents have risen 11 percent over the last three years, which may be the tipping point for renters to become homeowners.

So with interest rates only slightly above record lows, why aren't you running to the nearest lender to get a home loan? Maybe you're spooked by two mortgage myths - that you have to have 20% down to buy a home and that only buyers with perfect credit can get a loan. Neither one is true.

Lending requirements aren't as strict as media horror stories might lead you to believe. Freddie Mac is making it possible for more borrowers to meet conforming loan standards. Qualifying borrowers who buy within maximum loan limits, up to $417,000 in most areas and $625,000 in high-cost areas such as parts of California can get loans with less than 20 percent down. Of course, any loan with less than 20 percent down will require private mortgage insurance, but PMI is tax deductible along with the interest you pay on your mortgage if you itemize.

Low-income and first-time buyers can get a conforming loan with as little as three percent down from Fannie Mae, and after March 23, 2015, so will Freddie Mac borrowers. You'll have to meet certain credit and income qualifications, but the upside is you can start building equity now.

Government-guaranteed loans are also available with as little as zero down through the Veterans Administration for veterans and active-duty military. And the Federal Housing Administration has programs as low as 3.5 percent down. All FHA loans require PMI for the life of the loan.

It's also not true that only borrowers with perfect credit can get loans. Higher credit scores help borrowers qualify for a better rate. You can get an FHA loan with a credit score as low as 580 if you can provide the 3.5 percent down payment. A credit score of 650 or above will get you in the game for a Fannie or Freddie conforming loan if other variables in your financials are in order.

The rule of thumb is simple -- less money down requires a higher credit score and vice versa.

Credit scores tell you how much money you have to put down and they're a factor in your interest rate. If you put 20 percent down, you can get a loan even if you have a low credit score of 580 or 620. If you have a 740 or 760, the lender will allow you to put less money down.

Other lending myths are also out there, such as lenders are no longer doing stated income loans or jumbo loans. Again, that's not true. Lenders are doing loans that don't require an income verification if the customer has a large portfolio of liquid assets.

You may qualify for a better rate on one criteria, but not qualify on another. Lenders look at approximately 15 to 20 pieces of criteria, including credit scores, downpayments, liquid assets, current employment, revolving loans, ownership of other properties, and much more.

The lesson for you is this - don't try to outsmart the market. The housing market is getting stronger. In fact, there’s rarely been a better time to buy a home.

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Blanche Evans

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5 comments

  • Comment Link Margie B Monday, 23 March 2015 11:32 posted by Margie B

    Prices of housing keeps going up with interest rates threatening to do the same. After looking at thousands of homes online for a few years, we are told that many new updates were added. If the sellers didn't get their price or close to it after 1 or 2 years or more, they have to remodel. How sad it is that buyers are shown houses on the market selling for years, have added up-grades people want, but how often do the sellers do whole house re-plumbing, whole house electric checks and repairs, and maybe add the new full gutters that are out on the market to not have mold. Concern would be is the HVAC be brand new, brand new hardwoods (not cover-up slats) or cover-up tiling, or mold and mildew not mentioned I know it's a crime not to reveal certain things), a creek that has been a city's nightmare for its business districts never properly fixed over 25 years, loss of a potential retailer who is willing to take on that flooding issue when the city never fixed it properly to keep flooding out. All of a sudden a city lets a state college decide to build all these college facilities and athletic fields not find funds or donate funds to the serious flooding issue new college students wouldn't know about. Also PMI should be abolished for lower income newly weds starting out and senior citizens just wanting a home they can pay off quickly. Some seniors never owned a home and want to cap their rent (started out at $445 and is $800 + paying water, sewage, and garbage not any meter to see if overpaying for the ones with a larger household) that continues to go higher and higher! In a college town students take from their parents or get more loans for 4-6 people to rent what they were living like at home (investors buy properties in town, renovate cheaply, and charge as much as they can...at least a single family home rental for $1100+ a month and with yard and ingound pool $2000+ monthly which took their parents 20 years to arrive there. At least a mortgage stays the same in payments as long as they are responsible buyers and payers. The "house flippers" are flipping the bird on everyone forced to rent! The Great Recession has never left as well as foreclosures recovered. The owner of the lost home will destroy the property to get back at how they were treated. When we are told that 250,000-315,000 jobs were created each month, those are not 40 hour 5-7 days a week, no benefits, a job that's divided between 2 or more people, lower wages, and 20 somethings moving back home after college not able to pay their student loans or afford necessities. Student loans money should ONLY be utilized for dorms or starting off school commuting. Community colleges are such a real saver. All students should come out of high school and do community service work learning various job skills for 1 year to find their niche in life. More students than ever take 5-6 years graduating from a 2 yr. college or 6-8 years for a B.S. degree. It is foolish to stay in school for a doctorate or master's with more debt that MUST be paid digging the hole deeper. Our military personnel are being robbed of their school benefits as more of these small "colleges" of schools tour prospective students promising such high paying careers that are in demand. They are TOO costly!

  • Comment Link Brian Burty Thursday, 19 March 2015 19:55 posted by Brian Burty

    RE Cornelius simpleton view that housing purchasers are NOT effected by ObamaCare then just explain the proliferation of part time jobs, the undeniable increases in health care premiums and deductions, all taking away from one's disposable income and qualifying income. Those facts can inhibit one to buy a home. Numbers do not lie.

  • Comment Link Cornelius Gault Thursday, 19 March 2015 16:58 posted by Cornelius Gault

    @brian burry : This has nothing to do with Obamacare lol. some people are delusional. If folks are such fiscal experts, why are they not working for the Feds? Sit down please.

  • Comment Link Brian Burry Thursday, 19 March 2015 16:02 posted by Brian Burry

    With over 52% of the "Jobs" being part-time there are actually fewer working home buyers available to qualify for a home loan. Then take the fact that only 62% of available working people have jobs, housing has a difficult time obtaining a true recovery.
    The solution is not to reduce the work force to part-time jobs due to an unworkable "Health Care Solution (Obama-care)" but to eliminate the true road-block to jobs by allowing a Market Based Health System.
    Remember this "Solution" has 10.6 million people enrolled in Obama-care with 8 million being Subsidized on the backs of the 2.6 millon who pay much higher monthly fees, and very high deductibles - thereby again reducing the ability to buy a home those who pay this ridiculous rate of inferior health plans.
    Economics are actual numbers which effect the buying ability of those who are working, if their incomes are reduced by $1200 to $1400 monthly health insurance premiums. Rock and a hard spot position isn;t it?

  • Comment Link richard paz Thursday, 19 March 2015 14:52 posted by richard paz

    This was actually a good article, except for this statement;
    "If you put 20 percent down, you can get a loan even if you have a low credit score of 580 or 620."
    Most FNMA/Freddie Lenders will not lend below 640 irrespective of how much you have down. FHA on the other hand only requires 3.5% irrespective of a 620 or a 780 score.

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