Financing a Home – Fact vs. Fiction
It’s scary how much media attention there is currently regarding the real estate market. Has it hit the bottom of the market? Are we seeing any appreciation? How hard is it to get a home loan now? Is there still an opportunity to buy a home without a down payment ? Etc., etc.
Major lenders are still offering a variety of programs that can help an interested purchaser get a loan that can be tailored to his/her needs. Let ‘s talk about some facts versus fiction in our current marketplace.
1. Credit Scores
FICTION: You must have a perfect credit score to get a home loan.
FACT: Yes, most lenders are now requiring that borrowers have a minimum of 620 to 650 total credit score. However, there are some, like Wells Fargo Home Mortgage, that offer VA and FHA loans with a minimum credit score of 600. If your credit score is less than 600, make an appointment to talk with a mortgage consultant and he/she can advise you on ways to improve your score. Often, it’s a simple matter of transferring credit card balances or paying a debt down. It may be economically smarter to get a larger loan and take the money you’ve been saving to pay something else down or off. A trusted loan consultant can help you improve your credit score in ways you may have never considered.
2. 100% Home Loans.
FICTION: There are no 100% loans available to purchase a home in today’s market.
FACT: There are not only100% loans available, there are good 100% loans available. If you are a military veteran, you are probably eligible for a 100% VA loan. Check out the Florida Military Relocation site for more financing information of interest to active and retired military. Or, if your income falls within certain guidelines (very generous guidelines I might add), you are probably eligible for a Rural Housing Loan (and Rural does not mean in the deserted countryside!). These loans are offered at low interest rates…currently about 4.125%…with no down payment required!
3. Low Down Payment.
FICTION: If you can’t get a 100% loan, then you‘ll need at least 10% of the purchase price to get a loan.
FACT: FHA offers a loan with only 3.5% down payment and the seller can still pay all your closing costs and prepaid expenses! Loan limits vary depending on location.
4. Adjustable Rate Mortgages (ARM’s).
FICTION: ARM’s are never the best loan for the consumer.
FACT: An ARM may be just the loan program you need! VA and FHA both offer 5/1 ARM’s with the initial interest rate being set for the first five years of the loan and only then does the loan adjust . If you know that you are only going to be in the property for five years or less, why pay a higher interest rate? Let’s say you are only going to be in this property for three years (you know you are going to move or relocate), based on a $200,000 loan with today’s rates, you would have the option between a 2.625% on a 5/1 ARM with principal-&-interest payments of $803.30 or a 4.125% fixed-rate loan with principal-&-interest payments of $969.30. That is a $166.00 difference in your monthly payment! AND…you qualify for almost a 20% greater loan or 20% less income for the same priced property!
5. Buying a “Fixer-Upper”.
FICTION: Buyers can’t purchase homes in need of repair because the lender will not consider them.
FACT: There are “Renovation“ mortgages available. That’s right …in fact, FHA offers two different types. One loan is what is referred to as a “stream-line” renovation loan which covers repairs and improvements such as new flooring, heating and cooling systems, painting, general updating and new applicances, but nothing that would be considered structural. The second will actually cover structural repairs and upgrades (such as adding a bath or expanding the home)…this loan requires a licensed contractor to quote and perform the work. The buyer closes on the purchase and the renovation funds a re disbursed by the lender as the work is completed.
So, if you ‘ve been hearing only bad news about buying in today’s market place, reconside r! It is still a buyer’s market and both prices and interest rates are at record lows! My advice is to consult a reputable Realtor® who can recommend a trusted, local mortgage consultant (the rates and programs contained in this blog are offered locally in the Emerald Coast, Florida, area by Wells Fargo Home Mortgages). You may be surprised at just how easy it is to purchase a home!