Thursday, April 5, 2018

The 7 Fears That Keep People From Getting a Mortgage

There are seven main fears that keep people from getting a mortgage, but you shouldn’t have any of these fears because there’s no truth behind them.

Most people think they’ll never qualify for a mortgage for a variety of reasons. You shouldn’t be afraid though, because the odds are in your favor—according to Fannie Mae, more than seven out of 10 mortgage applicants get financing and find the house they want. 

However, there are still seven main fears that keep people from applying for a mortgage:

1. I don’t have enough money for a down payment. There’s a huge misconception out there that you have to put down 20% for your down payment. That’s not true. You can get a loan that requires a down payment of just 3.5%, and there are loans out there—USDA loans and VA loans, for example—that require no down payment at all. 

2. I have too much debt. Generally speaking, if you have a lot of debt, that probably means you make a lot of money. It’s not about how much debt you have, though. It’s about what your overall debt-to-income ratio is. In any case, this can be overcome because a lot of people I work with can afford more in terms of their housing payment than their rent and still end up qualifying. In most cases, you’ll be able to qualify for what you want.

3. I don’t make enough money. The money you make doesn’t determine whether you can get a loan or not. That just determines how much house you can buy. If you can find a house to rent for the amount you’re paying, you can find a house to own for the same amount. 

4. My credit score is too low. The average FICO score for a conventional loan is 751, and the average American buyer has a credit score of 685. However, don’t think this is the score you need to qualify. If you’re applying for an FHA loan, for example, you can have a credit score as low as 580. You can qualify for a VA loan with a score of 600. For a conventional loan, you can get approved with a score of 620. 

Don’t worry about having too much debt—there are ways to get you qualified.

5. I don’t want to go through the whole loan process only to get denied at the end. No one wants to fall in love with a house only to find out that they don’t qualify for it, but you can avoid this disappoint by getting fully pre-approved by a lender. To do this, they’ll review your credit, income, and assets. Once you get a full approval, 99 times out of 100, you won’t have any problems and you’ll be able to shop with confidence. Remember to be honest with your lender and provide them with all of your documents up front. 

6. What if I get a loan and get stuck with a horrible interest rate? There really aren’t very many subprime mortgages out there. A lot of lenders are still loaning on the exact same products. Many lenders will offer interest rates within 0.25% of each other, and that margin won’t affect your loan that much. It’s more important to look for a lender who offers the best service—someone who will be with you during the process and after the process. That’s the kind of service my team and me pride ourselves on. 

7. Buying a home costs more than renting. Your landlord’s PITI (principal, interest, taxes, and insurance) is almost always lower than what you’re paying them in rent. The difference between those two things is their profit. When you become a homeowner, that profit becomes yours as you build equity over the long term. It’s also worth mentioning that rental rates have skyrocketed recently. Every year you can face a rent increase, but you won’t face the same thing with a fixed-rate mortgage. 

If you have any other mortgage questions for me or there’s anything else I can assist you with, don’t hesitate to reach out to me. I’d love to help you.