Over the years I have heard a lot of people say a lot of things about being a homeowner and buying a home that are just misconeptions or myths. I decided that it was time to write about some of these myths of homeownership. Hopefully by the time you are done reading this article you'll have a better comfort and level of understanding when it comes to owning your own home.
Purchasing a Home With Little or No Money Down
Myth: When am I ever going to be able to buy a home, I do not have enough money in the bank.
Fact: As of 2008, you can buy a home with no money out of your pocket. Now, the trick to this is to get an FHA loan and use the AmeriDream down payment assistance program. Prior to 2008, you could purchase a home with 100% financing through through Fannie Mae's My Community Program, and Freddie Mac's Home Possible Program. There were some other programs, but these were the best.
However, with declining home values across the U.S. in 2008, these programs have been basically suspended until further notice. We in the industry seem to think that these loan programs will become available again when home values either stabilize or begin to increase (appreciate) again. With these programs "off the market" the only other option for buying a home with no money out of your pocket is through an FHA Home Loan program. For more information on FHA Loans see GetPreQualified.com's education section on FHA Financing.
Buying a Home With Less Than Perfect Credit
Myth: I am not ever going to be able to buy a home with bad credit.
Fact: Buying a home does not require that you have perfect credit. Although having good credit certainly helps with the types of loan programs you can qualify for. Good credit scores also help with getting better interest rates. Also with good credit you may be able to get 100% financing whereas with not so perfect credit you will have to use a FHA loan to buy a home with no money out of your pocket.
If your time line for buying a house is not immediate, you should work on your credit report and credit history to get your credit scores up. This is also known as fix my credit. .
Buying a Home With No Credit History
Myth: How can I get a mortgage to buy a home when I do not have any credit on my credit report?
Fact: It certainly helps to have at least a savings account and better yet a checking account. However not having one of these does not prevent you from being able to qualify for a mortgage. FHA Loan programs will allow you prove that you make payments on time by getting account histories from your landlord, the utility companies, your cell phone company etc. If you do have a checking account, you can use cancelled checks to prove that you make your payments on time. To get yourself ready to buy a home, it is best to establish credit and give yourself 6 months time to do it. Review how to establish credit.
Making Your Mortgage Payments on Time
Myth: I have bad credit because I don't always get my mortgage payment in on time.
Fact: Mortgage payments are always due on the first day of the month. While this is true, every mortgage company gives you a 15 day grace period to get your payment in. So from the 1st of the month to the 15th of the month you can make your monthly payment without any fees or negative marks on your credit. Once you get to the 15th, if you have not made your payment, you will have to pay some sort of penalty fee in addition to making your monthly payment. Even still, your credit will not suffer. BUT, if you do not make your payment by the 30th of the month - 30 days past the 1st of the month - your mortgage company will most likely report your payment late.
If you know that you are going to be late, make sure that you call your mortgage company and let them know. They can note your account that you had called to let them know. By taking this kind of proactive responsibility with your mortgage company, it is possible that will not report your payment late. Make a promise by when you will have it to them and see if they will take that agreement without reporting on your credit report that you are late if you pay after the 30th.
Need a Job To Get A Mortgage
Myth: I cannot get a mortgage because I just changed jobs.
Fact: While, under normal circumstances and loan programs, it is true that you cannot get a mortgage without a job, you can get a mortgage if you just changed jobs. What you will have to do is to prove your employment history. It is perfectly normal for people to change jobs. In fact it is rare to find someone who keeps a job for more than a few years before they move on to something else.
To get a mortgage you will have to prove that you have been working without too much of a gap for the past two years. Why your job history is important is that it shows that you have stable income which suggests that you are not a bad credit risk. It suggests that you will be able to make your payments in the future. The amount of mortgage that you can get will depend partly on your credit and the other on your debt to income ratio. See explanation of debt to income ratio.
Hopefully in reading these myths you now feel mortgage comfortable about buying a home. If you have further questions, please ask EdGAR for additional home buying, real estate and credit information.
Article By Dale Stouffer. Dale has been a mortgage broker since 1996. He has helped more than 1000 families buy the home of their dreams. This Article is designed to be of general interest and should not be considered professional advice. The specific information discussed may not apply to you. Before acting on any matter contained herein, you should consult with your personal insurance and or legal adviser.
