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Home Mortgages Thought Leader

3 Common Misconceptions About Buying a Home

By J.D. Crowe, Senior Vice President of Southeast Mortgage

J.D. Crowe, Senior Vice President of Southeast Mortgage

Working in the mortgage industry, I can’t believe how many customers are pleasantly surprised at their ability to purchase a home. Likewise, it is unnerving to hear how many misconceptions there are about what it takes to purchase in this economy. Here are some of the most common ones.

To buy a home, I have to put 20 percent of the purchase price down.
I don’t know where this idea came from. If you thought that you had to have that much, you might not believe what I’m about to tell you: you’re required to put down only 3.5 percent of the purchase price. In certain circumstances, you can actually buy a home for as little as $100 down. In all cases you can put down more than the minimum, of course. And putting 20 percent down will eliminate your need for private mortgage insurance, but don’t let the idea of a 20 percent minimum keep you out of the market.

With new government regulations, it’s very difficult to get a loan.
For five or six years, getting a mortgage was way too easy. Buyers were able to simply state their income and assets without any proof (SISA Loans). There were even loans that did not require income, assets or even a job history (NINJA Loans). Obviously this practice was unsustainable and led to the overextension of credit and ultimately to the housing bust because borrowers were not able to repay the loans.

When you come in for a loan today, you’re required to present proof of income with W-2s, recent pay stubs and, in some cases, tax returns. You also have to prove that you have the required amount of money for whatever down payment you have chosen to make. Imagine that – no more SISA or NINJA loans. Underwriting guidelines such as these actually protect buyers, the mortgage industry and the economy as a whole. It’s just common sense.

My credit isn’t perfect – I’ll never get a loan.
Perfect credit isn’t necessary either. The higher your score, the better your interest rate will be, but a score lower than 720 won’t consign you to renting forever. To get approved for a conventional loan, you must have a credit score of at least 620. For a Federal Housing Administration (FHA) loan, you must have a credit score of at least 640 for most lenders. If you’re thinking about buying a home, you should take a look at your credit. Improving your score is a smart financial move, and worth the time and effort to get a better interest rate.

If you’d like to learn more about mortgage loans, please visit our website at SoutheastMortgage.com.


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