After months and months of reading, hearing and watching negative news regarding the home mortgage industry I don’t blame people if they think it’s easier to land a man on the moon than get a mortgage to buy a home. I am here to assure you that nothing could be further from the truth.  So, as the new year sets upon us here are four things you should not believe about home financing.

1.  100% financing is no longer available (FALSE): Here is why this is false. We still have government backed loans such as FHA and VA. These loans allow you to purchase without any money down even if you have poor credit. In fact once the FHA modernization bill is implemented FHA will only require 1.5% down.

2. You need 720+ credit to get a loan (FALSE): Sure regular conventional loans just became more expensive for those with less than 680 credit scores, but that doesn’t mean you’ve been priced out of the market. For example if your score is between 620 and 639 you will be asked to pay 1.75% discount to get the same rate as someone with a 680 plus score. There are two things you can do, you can either pay this up front or elect to pay a higher interest rate. On a $200,000 loan a higher rate could mean an extra $82/month. Hardly a deal breaker. If this is a deal breaker than you probably shouldn’t buy that home anyways!

3. Lower documentation loans are not available (FALSE): Most lenders still maintain a lower documentation loan such as stated income.  However, these loans are now only available to borrowers who have difficulty establishing a steady income stream (self-employed or 1099). These loans now come with higher credit score and down payment requirements.

4. Investment loans are not available (FALSE): Lenders still have investment loans. It is just that income documentation is more stringent and credit requirements are higher compared to a few years ago. I am confident I can get an investor with good credit and income into a loan with as little as 10% down.

The bottom line is lenders still want to lend but they want to do it with the tried and true formulas used before 2002. This means as a borrower you will need to demonstrate a good employment history with stable income, have reasonable credit and some money saved. If you can do this then the American dream is yours. I promise you this is a whole lot easier than landing a man on the moon!

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Tags: home financing, loans, Mortgages, Real Estate
Categories: Mortgages, Real Estate