This information is from one of my favorite local mortgage specialists and posted here with her blessing. Janice Wescott is the Vice President and Senior Mortgage Banker at Reliant Mortgage. If you are considering getting back into a home, give me a call. We'll get together with Janice, put together a plan, and get you back on the path to home ownership.
Anyone who has been through the pain and frustration of a foreclosure, short sale, or bankruptcy has also had to deal with the advice of well meaning friends and family members. All too often this "helpful" advice is simply wrong. Our guest blogger, Janice Wescott, sets the record straight.
Myth #1 – I HAVE TO WAIT 7 YEARS BEFORE I CAN GET A LOAN
You do not have to wait 7 years to qualify for a mortgage after going through a mortgage delinquency and/or a bankruptcy. If you went through a Chapter 13 Bankruptcy, you only have to have completed 1 year of your repayment plan to qualify for an FHA Loan. FHA financing also allows you to qualify for a loan after 3 years from the date of a foreclosure on a previous home. If you completed a short sale on a previous home, you may qualify for a new mortgage in as little as 2 years from the date or the short sale. You must have re-established credit, and now is the time to start that process and get back on track!
Myth #2 – I WILL NEED A LARGE DOWNPAYMENT TO BUY A HOME
There is no question that there are fewer loan programs offered today with low or zero down payment. HOWEVER, just about anyone is eligible for an FHA Loan. You do not need to be a first time home buyer. The down payment requirement is 3.5% of the purchase price – that’s probably almost the same amount of money you would need for a rent deposit! Rural Development loans are 100% Financing for qualified borrowers and property specific locations. If you are a Veteran, you are likely eligible for 100% financing – and Myth#1 applies to RD and VA Loans as well.
Myth #3 – IT’S JUST CHEAPER TO RENT
Granted, every situation is different, but in many cases this just is not true. Any good plan has a short term and long term outlook. In the short term, with prices and mortgage rates at historic lows the monthly costs to own a home are often the same or as cheap as renting the same type of home. For example, at today’s interest rates, you can own a $100,000 home for less than $900 a month – that includes taxes and insurance! And by the way, you only needed a $3500 down payment. Even if you do not see significant savings in the short term, you must look at the long term advantages of home ownership. You are likely leaving thousands of dollars in the pockets of the IRS every year by not having an interest deduction on your taxes. The Housing Affordable Index is at a 20 year high – low prices and low interest rates WILL NOT remain at these levels forever. Don’t look back 5 years from now and say “I should have bought back then.” Remember this fact as well, your rent is going to eventually go up, when you own a home, you can virtually “lock in” your monthly housing costs.
Myth #4 – THERE IS PLENTY OF TIME TO BUY – PRICES ARE NOT GOING ANYWHERE
As mentioned earlier, Housing Affordability goes well beyond the price of the home. Interest rates are still at historic lows, and the market experts continue to warn of higher interest rates ahead. In addition, the Federal Housing Administration has hinted at increasing the minimum down payment requirements to reduce the risk of mortgage defaults. Remember that our Government is virtually carrying FHA, Fannie Mae, and Freddie Mac on their backs right now. Securing a mortgage while rates are at historic lows and down payments are very reasonable are a great reason to not let the perception of housing prices be your only decision method.
MYTH #5 – IT’S JUST TOO DIFFICULT TO QUALIFY FOR A LOAN
Hopefully by now you have realized that some of the myths that exist just are not true, especially with regards to qualifying for a loan. I know, you hear on TV all the time of “Difficult Lending Standards”. Yes, it’s true, you can no longer get a 100% mortgage with No Income Verification and a 580 credit score……Seriously though, the mortgage industry has simply gone back to the standards they had 10 years ago. You must have reasonable credit – 640 credit score as an average; You must verify your income and your debts represent less than 50% of your income; and You typically need a little money into the transaction – which in most cases can be a gift if necessary. Millions of people were qualifying for loans prior to the “Wild West” of mortgage lending, and customers are closing on loans every day in today’s market.
Yes, you may not qualify for a mortgage loan today – That’s why we did this report. The first step is realizing that owning a home again (or for the first time) is the best thing you can do for yourself. Then, you need to make a plan to achieve this. Now is the time to contact us and allow us to review your situation and help you get on a path to home ownership. All too often, people wait until “they are ready to buy”; to only find out they cannot because they did not plan ahead. There are tens of thousands of people who experienced a foreclosure, bankruptcy, and/or short sale in the last several years. Over the course of the next 24 months, many of these people will have the ability to own homes again – Will you be one of them?
For Additional Information on becoming a homeowner again or for the first time, please call Janice Wescott for a FREE Consultation at 207-831-9272 or email her at jwescott@reliantloan.com
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