With the market improving and real estate moving in what can only be described as an impressive rebound, many potential homebuyers are getting pre-qualified for a mortgage and seeing what they can afford. But, there are some misconceptions out there regarding mortgages, qualifications and foreclosures that keep many would-be homebuyers on the sidelines instead of taking action. Remember, it is the smart consumer who investigates, educates themselves and understands their options.
Here are a few common myths about mortgages you should know about:
- Mortgages are too hard to get right now and it is better to wait a while – False. Mortgage giants Fannie Mae and Freddie Mac, both are government-sponsored enterprises that back most of the loans generated in the country, about 90 percent, offer loans with little money down. There are several options out there and though qualifying for a loan may be harder than it was during the housing boom back in say 2004, it is still an obtainable goal for most potential homebuyers. Now is the time to secure that loan at a very low interest rate.
- My credit score may stop me from qualifying for a loan – False. Though it has been harder to secure a loan since the housing bubble burst some FHA lenders have recently lowered the required FICO score (created by Fair, Isaac and Company these credit scores are the preferred brand used by most major lenders) from a required 620 down to a fairly low score of 580, though you may have to put a bit more into your down payment. You can still qualify however so you should not write yourself off even if you have had credit difficulties.
- I can’t afford what is out there for sale – False. Never assume you cannot afford to own rather than rent, partially in this recovering market. The monthly mortgage payment of many properties that are currently for sale come in at about the same amount per month as rental costs of many apartments, condos and townhouses throughout the region. But home prices are slowly on the rise so now is the time to make your move.
- The real estate market is improving, but I should wait a bit longer to buy – False. Home prices have stabilized and are slowly rising. One of the greatest benefits of home ownership is that the money you pay each month goes into an investment, not the pocket of your landlord. This investment builds your personal wealth through equity, or the value of your house vs. what you owe on it. As the current market continues to improve, home values are expected to rise over the next several years, which means your equity will grow. Remember that the same home you are looking at in today’s market could cost you that much more in a few years time. It is like buying something at a good sale price knowing the price will continue to rise with each passing year.
Consumer confidence is steadily on the rise and it is a wise consumer and home buyer who takes the leap now to get a good price and financially favorable loan terms, like amazingly low interest rates, which may not exist years from now.
photo courtesy of Tax Credits