Worried you aren’t ready to buy a home? Here are the top mortgage myths–debunked.
We talk to a lot of first-time and even second-time home buyers who are confused when it comes to mortgages.
Persistent mortgage myths keep many could-be buyers from realizing the dream of owning their own home.
Accredited Buyer’s Representative, Rachel Bradley, can guide you through the mortgage maze. Check out her stellar client testimonials. And then call/text 503-936-3373. You’ll be glad you did.
What’s the minimum down payment these days? How about the minimum credit score? The minimum debt-to income (DTI) ratio? And who pays closing costs?
The National Mortgage News recently highlighted several mortgage myths that continue to befuddle borrowers:
- Down Payment This is the primary stumbling block for wanna-be home buyers. They think they’ll need a down payment of 10% to 12%. (For a $500,000 home, that’s a hefty $50,000-$$60,000.) Not true. The minimum down payment for a Fannie Mae loan is 3%.
- Debt-to Income Ratio Home buyers often think that their DTI ratio must be no higher than 33%. Not True. Actually, a 43% debt-to-income ratio is the highest ratio a borrower can have and still get a Qualified Mortgage. There are some exceptions for small lenders (under $2 billion in assets and no more than 500 mortgages in the previous year). And even large lenders have a bit of latitude here.
- Closing Cost Disclosure Home buyers are wary of surprises at closing. Will they have to scramble for additional, unanticipated funds? No, not anymore. TILA-RESPA, new mortgage rules that took effect in 2015, provide borrowers with a clear picture of mortgage closing costs BEFORE closing. Buyers now receive a Loan Estimate Disclosure statement in advance of actual closing.
- Closing Cost Payment Home buyers worry about how they will pay closing costs, which can be substantial. But buyers can negotiate closing costs with the seller. If the offer is strong, the seller may be willing to share closing costs with the buyer. In any case, it doesn’t hurt to ask.
- FICO Score Home buyers often think that their credit needs to be rockstar to qualify for a mortgage. Not true. To qualify for a Fannie Mae-backed loan, borrowers need a minimum FICO score of only 620.
- Credit History Home buyers often think that no debt is a good thing. But when it comes to getting a home loan, debt–and more specifically a history of effective debt management–is really important to the lender. A lack of debt management history can be an obstacle to qualifying for a home loan.
In the News
- 7 Mortgage Myths That Still Befuddle Borrowers | National Mortgage News
- Buyers Overestimate Mortgage Requirements | Realtor Magazine
- Debt-to-Income (DTI) Calculator | Bankrate
- Why Debt to Income Matters in Mortgages | Bankrate
Copyright 2016 Susan S. Bradley. All rights reserved.