February 13, 2017

Stop Guessin' and Stressin'

True or false? Fact or fiction? Fantasy or reality? It's hard enough to sort through the day's routine data dump, let alone information about homebuying — a topic many would consider one of the most overwhelming (yet gratifying) hurdles of a lifetime. Freddie Mac Vice President of Single–Family Affordable Lending Danny Gardner set out to dispel the many myths about mortgages that abound in the minds of many homebuyers.

Stop Guessin' and Stressin'

MYTH: "Down payments have to be in the 20 percent range."
FACT: The average down payment among first–time homebuyers in 2016 was 6 percent, and for repeat buyers, down payments were between 13 percent and 14 percent, according to the National Association of Realtors. Some mortgage products let eligible borrowers put down as little as 3 percent — or even less, in some cases.

MYTH: "Down payment must come out of my funds (savings)."
FACT: Down payment funds may come from many sources including financial gifts from family and friends as well as grants that can be used for closing costs as well as down payments. You can use your financial assets to qualify for a conforming, conventional mortgage.

MYTH: "I must have a pristine credit report to secure a mortgage."
FACT: The industry is working toward solutions that make sense for borrowers with moderate credit scores and/or untraditional credit histories. It is important for borrowers to understand their credit scores and for loan originators to understand the range of products available for their borrowers.

MYTH: "The loan–origination process is just too complicated."
FACT: Help is available. HUD— approved, nonprofit housing counseling agencies offer services that can help potential borrowers prepare for successful homeownership, at little or no cost.

MYTH: "I have too much student debt to be approved for a loan."
FACT: Research suggests that student debt only slightly affects the probability of homeownership for those who earned a degree. Understandably, a higher student debt balance lowers the odds for homeownership, especially for those who didn't graduate, but by the time student–loan borrowers reach their 30s and move into prime home–buying age, many have paid off their debts.

MYTH: "If I get rejected for a loan once, no one will ever give me a loan."
FACT: This isn't a one–strike–and–you're–out deal. It's important that buyers understand why they were rejected the first time around and work to fix those issues. For example, people could correct inaccuracies on their credit reports and reach out to housing counseling agencies.