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Getting A Mortgage: 3 Big Lies to Ignore
The mortgage market has gone through significant changes since the housing bubble burst in 2007. Everyone knows that housing prices crashed, causing valuation issues for most homeowners. Banks tightened their lending standards from “having a pulse” to having good credit and money to put down. Getting a mortgage became more difficult.
Most of the lending guideline changes did indeed alter the way loans were made – and the number that were made. There’s no question that we as an industry are making far fewer loans than we did back in the mid 2000’s.
But there has been an exaggeration to some extent with regards to “getting a mortgage” and the severity of the tightening. Banks and mortgage lenders are still lending money, and always have been. A few misconceptions have emerged from the market crash that we will dispel in this article. I’m calling them mortgage lies…
Mortgage Lie #1 – You need perfect credit to qualify for a mortgage
Gone are the days of qualifying with a 500 credit score. Yes, it’s true that credit standards have increased. You must be able to show that you can manage your debt obligations in a responsible way.
But perfect credit? Not necessary.
A credit score of 740 or higher is considered the highest tier or credit bucket. This will qualify you for the best Conventional mortgage rates. I’d say that at least half of my clients do not have a 740 credit score. In fact, many of them have scores below 700.
Getting a mortgage is easier with a FHA loan. FHA loans are not credit score driven, and do not punish borrowers with lower scores.
Mortgage Lie #2 – You need to put down a lot of money to buy
VA loans are still 100% financing for eligible veterans. Buying a home in a more rural location? The USDA offers a 100% loan program as well.
FHA loans are the favorite of many younger and first time buyers. You can put as little as 3.5% down with a FHA loan…and that can come from a gift!
Even Conventional loans have a 95% low down payment program.
Mortgage Lie # 3 – It takes a long time to close a loan
As a result of the market crash, many lenders shut their doors. The industry as a whole consolidated to fewer – more stable players. This caused capacity issues, as the larger lenders were forced to pick up the slack. Getting a mortgage was taking up to 4 months in some cases.
Years have gone by, and most of the good banks and lenders have adjusted their staffing levels accordingly. Most loans can be originated and closed in a reasonable amount of time.
The mortgage industry has changed greatly over the past several years. Loan programs, credit guidelines, and even interest rates have all gone through an adjustment. But one constant has remained in place – getting a mortgage is possible for good borrowers with deals that make sense.
Have you experienced problems with getting a mortgage?