Are you short that 20 percent down payment? Have you been in a job
less than five years? Is that out-of-control college credit card frenzy
years ago keeping you from even thinking about applying for a home
loan? If any of these scenarios ring true for you, it doesn't mean you
can't buy a home.
Although rising home prices are making it
increasingly difficult for first-time homebuyers, more Americans could
own a home if they were more in tune with accurate information about
the homebuying process and the range of loan products available.
The 2002 Fannie Mae National Housing Survey reveals that some Americans
have erroneous beliefs about why they can't own a home.
demand for homes might be even greater if more Americans were
knowledgeable about the home-buying process and the opportunities that
exist in being a homeowner," the survey says.
For example, 14
percent of Americans said they would like to buy a home in the next few
years but say it's financially out of reach. Another 10 percent say
they would like to buy, can afford to, but cannot buy for other reasons.
particular, there is a gap between minorities and the rest of the
country as to what they believe is fact or fiction going into the
mortgage process," the survey states.
The survey found the myths are:
- You need 20 percent of the cost up front. Some 44 percent of adults answered this incorrectly.
- Housing lenders are required by law to give you the best possible loan rates. Among adults, 39 percent believed this is true.
- Thirty nine percent also believed you need to be in the same job for five years to qualify for a mortgage.
need to have perfect credit to buy a home. This was the least common
myth with 31 percent of adults believing this to be true.
- Some 36 percent of those surveyed didn't know that mortgage interest is tax deductible.
So, to set the record straight:
- Today there are a number of innovative mortgage products
offered with 5 or 3 percent down payment. Some even offer no-down
payment options if credit is excellent. The informed first-time buyer
will shop around and research the various mortgage programs available.
lender offers its own rate based on their set of standards and type of
loan (fixed, adjustable, balloon, etc.). Rates change on an almost
daily basis. Once you've determined you're ready to buy a house, you'll
want to check rates with various lenders on a daily basis. Before
you're checking fixed rates against fixed rates and adjustable against
- While job stability is important, you don't
need to be working for five years in the same job to get a loan,
especially if you have a larger down payment and a good credit history.
There are even mortgage products for those who are self-employed and
have difficulty documenting their income - if their credit is good and
they have 25 percent down payment.
- Although your credit
history plays a role in whether you will obtain a loan, the good thing
is that it doesn't stay with you forever. Once you can establish a
pattern of managing your credit wisely, keeping credit card balances
low and paying your bills on time consistently, your credit score will
be positively affected. Also, those with bad credit scores may qualify
for CreditWorks, a mortgage program that involves debt management
counseling. After 18 months, even those with very low credit scores may
qualify for a conventional mortgage.
- And finally, when you
weigh the financial costs versus the benefits of buying and owning a
home, you'll want to factor in the tax deductions. Closing costs,
points, and the mortgage interest you pay each month (which is a good
chunk of your payment unless you've made a huge down payment) are all
First-time homebuyers need to educate themselves on what it takes to buy a house and all the alternatives.
it's never been easy to buy your first house, the lowest interest rates
since the 1960s mean opportunities exist," said Martin Edwards Jr.,
president of the National Association of Realtors.
The typical entry-level buyer can buy a home costing $107,900.
more expensive markets, this means a condo or townhouse may be a more
attractive option given the typically higher cost of single-family
homes," Edwards said. "In many cases buyers are willing to make a
longer commute to own a home, but it's important for first-time buyers
to learn about programs targeted to their needs before making any
Written by Michele Dawson