Today I want to address some common beliefs about mortgage loans that are not true. There are many people who delay applying for a mortgage because they believe an outdated or false idea that they think disqualifies them for a mortgage loan.
1) I have had a bankruptcy-therefore I can't obtain a mortgage.
People who have had bankruptcies in their past are absolutely eligible for a mortgage as long as it has
been a minimum of two years since the discharge of the bankruptcy (Chapter 13's are normally 1 year) and they have re-established credit. In the case of a foreclosure the wait is three years from the date that the sheriff's deed was issued.
2) I should pay off and close all my credit accounts to get ready for a mortgage.
You absolutely should NOT pay off your accounts. Mortgage lending as a general rule requires three
credit accounts open and reporting for twelve months to qualify for a mortgage loan. There are
exceptions depending on the type of mortgage, but three credit lines paid on time for year normally
provide a buyer with a good credit score and enough credit history to obtain mortgage financing.
3) I am a little short of cash this month. If I don't pay my mortgage I can double up next month and it
will be okay.
Besides the fact that you should never pay late for where you live, paying your mortgage late will
disproportionately drop your credit score and make it impossible to refinance your current mortgage or
allow you to buy a new home for a period of one year. If you have to pay something late-make it a credit
card or some other type of loan.
4) The lender quoted me an interest rate-so that is the rate I will get.
As we have discussed in other entries, an interest rate is predicated on several different factors, the
most important of which is the fact that interest rates change daily and sometimes more than once a day.
5) I just started a new job. It will be at least two years until I can buy a home.
Not true at all. Typically there needs to be job history in order to obtain a mortgage but if you just
graduated from college and got a job in what you studied, the time spent in school counts as job time.
Additionally, if you moved from one job to another in the same field there is no problem with a new
position if all probationary periods have been completed. A switch from nursing to landscaping might raise
an eyebrow-but other factors come into play such as did you improve your income situation? Do you have any previous job history in landscaping?. How long were you at your old job? Did you receive
any education for the new job? Also moving from part time to full time with the same company is viewed
favorably.
6) When I add in my overtime I can buy a lot more house.
If you have worked at your job for two or more years you can add in the overtime-otherwise straight
time is what is calculated to qualify for a mortgage. Likewise, if a spouse or significant other does not
qualify credit wise for a mortgage, their income can not be computed for qualifying purposes.
7) I need to have 20% to put down in order to buy a home.
This is also not true at all. FHA requires 3.5% down. Two other government programs VA and USDA no downpayment. If you wish to use conventional financing 5% down is what is normally required though
there are some programs that work with 3% assuming other qualifiers are met.
8) I can roll my closing costs and/or repair items into my mortgage loan.
Normally, no, you can't. There are a couple of specific instances where this is allowed-the FHA 203K
repair loan or the closing costs can be rolled into the USDA loan assuming the house appraises for more
than the sale price-but the exceptions are few and far between.
9) I have bad credit, so I will need a co-signer on my mortgage.
If you have bad credit no co-signer on earth can help you get a loan. Credit qualifying is done using the
lowest middle score of the two borrowers. If yours doesn't qualify you for the loan-your application will
be denied.
10) I was turned down at my bank, therefore I can't get a mortgage loan.
Sometimes that is true, but many times it isn't. Banks often go for the low hanging fruit-i.e. the best
qualified borrowers, asset and credit wise. And, banks don't always have a full array of loan products
at their disposal. So if you qualify for an FHA loan but not a conventional loan and your bank doesn't
offer the FHA product-you may be declined. But that doesn't mean you don't qualify for a mortgage.
That just means that you don't meet the bank's criteria. Check out your local mortgage broker-brokers
have several lenders and products at their disposal. They may have a mortgage that works for you.
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