Debunking 5 common mortgage misconceptions

The national mortgage industry has experienced unprecedented change during the past two years, which has resulted in a number of popular consumer misconceptions regarding the availability of home financing.

Don’t believe everything you hear, however. For people considering buying or selling a home – or both – it’s important to take a good look at some of the most prevalent mortgage rumors making the rounds, because you’ll quickly discover there’s more to the story than meets the eye. The truth is, with rates at near-historic lows and good deals on properties to be found everywhere, it’s a buyer’s market, and there may never be a better time to buy.

Mortgage Misconception #1: “There’s no money available for home loans.”

While it’s true that the recent credit crunch temporarily affected the mortgage markets, the 2009 credit market has progressively improved for homebuyers. In fact, many established homeowners have already seized upon the opportunity to refinance to lower interest rates. These “refis” prove that savvy consumers can do more than survive in a tough market – they can improve their long-term financial outlook and save thousands over the life of their home’s financing.

Mortgage Misconception #2: “The days of low down payments are gone for good.”

While it’s true that “no money down” loans are almost exclusively restricted to VA loan qualifiers with full entitlement, Federal Housing Administration (FHA) loans with down payments beginning at 3.5% are available and popular. Some FHA loans allow borrowers to use gift funds from family members, friends or employers to help cover the down payment.

Mortgage Misconception #3: “Buying a home in a high-cost area is almost impossible.”

Although jumbo loan figures fell in 2008, similar to many other financial statistics, perhaps surprisingly, they’ve made a comeback in the first quarter of 2009. According to a recent issue of Inside Mortgage Finance®, the Jumbo sector’s production figures were up 109% over the 4th quarter of 2008. While credit requirements for Jumbo loans have become somewhat more restrictive, they’re still available for qualified borrowers.

Mortgage Misconception #4: “In today’s market, closing on a loan is difficult and complicated.”

The majority of loans closing in 2009 are no more complex than they were in the past. Keep in mind, even in boom times, there were still a great number of disclosures and necessary paperwork associated with closing a conventional “full doc” loan. This hasn’t changed. Although first-time home buyers may find the process a bit overwhelming at first, the truth of the matter is, most of this paperwork is mainly designed to protect the consumer. A reputable lender will take the time to go over all closing documents with buyers before the day arrives, making the experience as fulfilling and exciting as any other major life event should be.

Mortgage Misconception #5: “Low interest rates are a thing of the past.”

Even though mortgage rates are beginning to creep upwards, the truth is that today’s numbers are still some of the lowest in years. Take a few minutes to check out your local newspapers or visit some rate-comparison websites -- you'll quickly discover that highly competitive rates are far from yesterday's news.

For all the misconceptions that are out there, it may be comforting to know that a quick “reality check” can make you feel much better about the current homeowners market. There’s nothing stopping you from making that dream house a reality, here and now, in even in challenging economic times.

About the author

Noel Shepherd is a MetLife Home Loans Relationship Manager with over 10 years experience in the home loans industry. For additional information on the home loan process, visit his website or call Noel Shepherd at 202.642.4305.

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