Mortgage Myths
Mortgage Myths – No Barrier to Today’s Home Buyers
Owning a home is a goal for many families, but some consider it an impossible dream because they have heard that it is difficult to qualify for a mortgage. Today however, those old “mortgage myths” are no longer true.
One myth is that mortgage lenders do not lend money to young people. The fact is that the average first-time home buyer is 32 years old, according to the 2003 National Association of Realtors (NAR) Profile of home buyers and sellers years ago, lenders required a 20 percent of the home’s value as a down payment. Today however, many mortgage programs require minimal down payments of 5% or even less. That same NAR profile reported that first-time home buyers typically made a down payment of six percent, and less then one-fourth had a down payment of 20 percent.
There are a number of innovative programs designed to make getting a mortgage for the first time easier. Mortgage insurance now makes it possible for lenders to offer mortgages with as little as three to zero percent down. Plus they may receive gifts of money from family to help with the costs. Some first-time home buyers worry that monthly mortgage payments will be more expensive than rent, especially in the long run. NAR’s first time home buyers affordability index found that the average monthly mortgage payment for principal and interest was $761 in the second quarter of 2003. Homeowners enjoy the additional benefit of lower income taxes and peace of mind in knowing they are no longer subject to rent increases. They also trade in a stack of rent receipts for mortgage payments, which are an investment in a capital asset and an opportunity to build wealth.
Another myth is that a single late payment or loan default in a credit history will disqualify a homebuyer from getting a mortgage. The truth is that lenders look primarily at ability and willingness to make payments in the future. Failure to make payments on time in the past because of unemployment, illness or divorce will not disqualify you if you are no longer having financial problems. If you have kept up to date on payments since that time, lenders are likely to consider your mortgage a good investment.
Additionally, some people think they do not have a high enough income to qualify for a mortgage. In reality, the average qualifying household income for starter houses during the second quarter of 2003 was $36,528 a year. Lenders calculate how large a mortgage you can afford based on your income and other long-term debt such as auto loans.
A home mortgage is a good value today and can be a sound investment for the future. Lending institutions are eager to assist first-time home buyers, and today’s mortgage products give loan officers more reasons than ever to approve your application.
Obtaining the right mortgage does not have to be a difficult experience, so don’t let mortgage myths keep you from making your dreams of homeownership a reality. Just remember to choose the right lender, one you can trust, and one who offers flexible mortgage products at competitive rate.
Amy Seils is a Mortgage Originator For JP Morgan Chase Bank. For any questions regarding mortgage please call Amy at (585) 241-6908. or e-mail her at Amy.L.Seils@chase.com