Debunking Five Mortgage Misconceptions
In a recent feature for the FutureCast Forum, Trevor Bennet of Caliber Home Loans debunks ten misconceptions about mortgages and outlines ways savvy buyers can navigate Seattle’s red hot real estate market. The city’s population growth, which averages approximately 1,000 new residents per week, paired with anemic inventory, have helped contribute to an increase in home values that is making many would-be buyers beware of leaping into homeownership.
Below are five of Bennett’s top misconceptions, which you may want to consider before making your next move:
1. A Retirement Dream Home Can Wait
While many believe it’s best to purchase that retirement dream home once they’ve actually retired, income can become an issue if you need to rely on a mortgage to finance the new home while you sell the current one. Most loans are based on income, not assets, so it’s better to start thinking about your next move a few years before retirement.
2. My Child(ren) Can’t Afford a Home
With the gift of wealth building, you can help your grown children secure their first home through a loan, rather than a gift. This type of program allows a relative to be on a loan as a non-resident and can help the primary loan holder qualify for a mortgage.
3. I Should Avoid Mortgage Insurance
It may be tempting to wait and save up the 20% down payment to avoid mandatory mortgage insurance, but with the rate at which homes in the city are appreciating, it is more economical to buy now. Purchasing will also allow you to build up equity which will help you be able to make a full 20% down payment on a future purchase.
4. My Financial History Means I Won’t Qualify
Whether it’s a former bankruptcy or foreclosure holding you back, there are portfolio loans that allow consumers with less than stellar credit to make a purchase. They are carefully and responsibly underwritten, and allow you to purchase a home despite past misfortunes.
5. I Don’t Want to Sell Because I’m Worried I Won’t Find a Home
You might be outgrowing your current home, and now you know it’s time to sell and find a new one. Many people are concerned about putting together a down payment when equity is tied up in a property, but this can be resolved by putting down a minimum payment and making a lump sum payment on the principal once your current home sells.