Denver Home Living Huettner Capital Summer 2017 | Page 9

ARE THESE FIVE COSTLY
MORTGAGE MISCONCEPTIONS
PREVENTING YOU FROM BUYING TODAY?
I
By Todd Huettner
regularly help homebuyers who tell me they are putting off
a home purchase because they need to wait on something
so they can qualify for a loan or get a “better” loan. Quite
often, they base the decision to wait on misconceptions
of loan requirements. The source of this misinformation
usually comes from lenders without flexible loan plans or
friends and neighbors who lack industry knowledge. Also,
loan rules have changed in the last few years. The problem
with putting off a home purchase is that rising interest
rates and home values make waiting to buy very costly. of less-than-perfect credit is often only a few thousand
dollars. Waiting just a year will cost you more.
THE MISCONCEPTIONS AND TRUTHS:
1. I need a 20 percent down payment 5. I have the down payment, but not the closing costs
4. I don’t have enough saved for my down payment
Maybe not. However, you probably don’t know all of
your options. You can use a gift from a family member.
Your employer can help with a grant or loan. You may
also be able to borrow from a retirement account or use
another asset including stocks, bonds, or trust accounts.
Just be sure to carefully evaluate these options to make
sure they are appropriate for your financial situation.
The seller and your lender can help you pay for all of the
closing costs other than the down payment. If you do it right,
you can come to closing with only the down payment funds.
You need to plan this out with your lender in advance, so ask
the lender about the pros and cons and best ways to do this.
You don’t. The standard conforming loan minimum down
payment is only 5 percent (FHA is only 3.5 percent) and it
can all come from a gift from family. There are even options
that require less than 3.5 percent down. However, if you
cannot come up with at least 3.5 percent with help from
family, maybe you are not financially ready to buy a home.
THE COST OF WAITING
Postponing the decision to buy a $350,000 house in Denver
in 2014 would have cost you over $100,000 because that
house now costs over $450,000. Waiting just one
year can easily cost you $20,000. The true cost
is even bigger if you add in higher interest
rates, rent, and the quality of life you
could have had in the new home.
Don’t let yourself be a victim of
this costly misinformation.
2. A bigger down payment will save me money
Not always. While putting down 10 percent will lower your
mortgage insurance compared to putting down 5 percent, and
putting down 20 percent will eliminate mortgage insurance
altogether, waiting several years to save up that much for
a big down payment will cost you far more right now.
3. My credit isn’t good enough
It probably is. Most people vastly overestimate the credit
score they need to qualify for a loan and the cost of less-
than-perfect credit. FHA has options for credit scores
down to 580. More importantly, a better credit score
will not always save you money. In fact, a score over 740
won’t save you a dime on a standard fixed-rate loan from
Fannie Mae or Freddie Mac. More importantly, the cost
Every situation is different,
so finding an experienced
and knowledgeable lender
who can walk you through
your situation and loan options
is essential to your success.
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