When mortgages first came into existence in 1934 the amount of a mortgage was limited to 50 percent of the property’s market value. The term of the mortgage was only 3-5 years, and ended with a balloon payment.
Today there are many types of mortgages available, which is good for the consumer, but also leads to a lot of confusion. Here are some of the top myths about mortgages we encounter at Southeast Mortgage.
1. You need to put 5 percent down.
Some loans don’t require any down payment, while others may require just 3 or 3.5 percent. There are several low-down payment options available, including FHA mortgages, the Conventional 97 program from Fannie Mae, VA mortgages available to members of the military, USDA mortgages and others for those who may not qualify for these. To find out more about these and other mortgages with little or no down payment, and whether those types of loans are right for you, talk to a licensed mortgage loan originator.
2. It’s more difficult than ever before to apply for and get a mortgage.
It is true that consumers need to provide more documentation than they did 6-10 years ago and need to provide proof of their income, assets and identification. But this documentation is necessary and should have always been part of the process.
When I started in the business in 1998, you could get loans with less documentation required, but most consumers had to provide the full array of documentation.
Between 2000 and 2007 there was a nationwide push to get low- and moderate-income people to become homeowners. The result was that less documentation was required as underwriting standards loosened. In many cases, consumers merely had to complete an application without even proving a statement of their income, assets or employment and many people took on more debt than they could reasonably handle.
3. It’s hard to find a place to get a mortgage.
It is true that there are a lot fewer firms to borrow from. At the height of the industry, there were more than 3,500 mortgage brokers and lenders in Georgia. The number plummeted in 2012, down to 750 — an 80 percent decrease.
But there are still plenty of places where you can get a loan. You can start by getting a list of licensed entities from your state banking department. For licensed lenders in Georgia, visit this site.
4. There are still a lot of distressed properties available and you can make a low-ball offer.
That market over the last six months has turned around 180 degrees. People are listing homes for market value and getting multiple offers, sometimes for even more than the listing prices. There has been a significant increase in value at a rapid pace, particularly in metro Atlanta. However, there are still great deals available because of the depreciation in the market over the last few years, but finding them requires more research now.
5. You have to get a mortgage where your real estate agent tells you to.
You may encounter a real estate agent that may be pushing you toward one particular lender. It could be because your agent trusts that lender and has had good experience with him or her. But you are under no obligation to work with any particular mortgage loan officer. You are free to get your mortgage wherever you want.
It’s fine to take referrals from your friends and colleagues, but you need to do your own homework and make your own choice.
The days of the overly simple loan process are long gone, most likely never to return. It does take more time and more homework on the part of consumers to get the right loan for their particular situations, but just imagine how few of us would be living in our own homes if we had to come up with half the purchase price? The array of choices available is beneficial to suit the various needs of consumers today.