The home buying process can be very confusing. Take a few moments and dispel some of the top myths surrounding this process.
1: You can't use a gift as a down payment.
This myth has been around for years, but it's not true! You can use a gift from a family member or a non-profit foundation for a down payment. Lenders have found that new homeowners are especially motivated not to default on their mortgage, when a family member has invested in the property.
If you do accept a gift, the lender will want proof you don't have to pay the money back. They want to make sure you don't have any more debt to pay back in the future.
2: You must have perfect credit to buy a home.
There is an entire segment of the mortgage industry built up around providing loans to people with less than perfect credit. Although recently this sub-prime mortgage issue has got a lot of people into trouble, the biggest thing you have to remember is to refinance before the loan is due and before your mortgage payment doubles. Keep a close eye on your finances and any interest rates and fees you may incur in the future.
3: You can't buy a home for at least 10 years after declaring bankruptcy.
If you reestablish your credit, you can qualify for a conventional home loan in as little as 4 years after declaring bankruptcy. For government loans like those sponsored by the VA, the wait is even shorter. You can qualify for an FHA loan in as little as 2 years. Learn more about financing here.
4: You can't use a loan for a down payment.
Actually, this myth is partly true. You can't get an advance on your credit card or an unsecured personal loan as a down payment. You can't borrow your down payment from friends or family, either. But, there are a number of types of loans that are perfectly acceptable to use as a down payment for buyers.
These include loans against your retirement account, such as a 401K. In fact, this is one of the most popular sources of a down payment. If you have valuable possessions, such as art, jewelry, stocks or an investment account, you can use those as collateral for a down payment loan. These are called pledged asset loans, because you are pledging your assets to guarantee payment.
5: Down payment assistance programs are only offered in the inner city or blighted neighborhoods.
Nothing could be further from the truth. There are thousands of different DPAPs or Down Payment Assistance Programs available in different areas. Many of them are offered by city, state or local governments. Others are nationwide. Still others are offered by non-profit foundations.
6: You must have at least a 20% down payment.
This was true before 1934. That's when the government first started offering VA and FHA loans with down payments as low as 3% to 5%. Today, there are dozens of different loan products available. Some require down payments as low as 5%. Others require no down payments at all. They're called 100% financing, where you borrow the down payment as well as the mortgage amount. Be careful on these though and make sure you understand everything in your loan documents before you sign. If you are not clear make sure the lender explains everything to you and if they won't, there is something they are hiding.
Grant it, things do change and new programs open up every day as old ones disappear. What may work today, may not work tomorrow. Check with your Wenatchee Windermere agent for all the low-down on today's fluctuating market.
Mortgages and payments can be confusing but knowing what you cannot do is a great step to educating yourself on buying a home. For all Wenatchee real estate, don't hesitate to contact one of our agents. We would be happy to help you find a home, sell a home, or answer any of your questions concerning real estate.
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