Myth 1: You need a 20% down payment to buy a home.
Fact: You can by a home with 3% or even zero down.
There are many home buyer programs that help cover your down payment, closing costs, mortgage insurance, and even renovations.
Let’s take a look at some programs that make home buying more affordable.
3% Down Payment Program. This program has allowed many Louisville renters to afford their own place.
Other than being affordable, it’s a great option for three main reasons:
1. Low monthly payments because mortgage insurance is optional.
2. Your down payment can be a gift.
3. There are no income limit in Jefferson county.
That said, the minimum credit score requirement is 680. If your credit score is just a little below that, don’t rule this option out. You still might be able to qualify.
This will depend on the credit score your lender pulls, which is not always the same credit score you get from credit check sites.
3.5% Down Payment Program. This program is a great option if your credit score is 679 or lower. 580 is the min credit score requirement.
3.5% Down Renovation Program. This program is for anyone looking to buy a fixer upper. With this program, the cost of renovations is included into your mortgage.
Minimum credit score required is 580 to qualify.
5-15% Down Payment Program. Like the first program, low monthly payments because mortgage insurance is optional. Your down payment can be a gift. 620 or higher credit score required.
There are many more programs that help homebuyers afford a new home. Before you buy a home, make sure to scout for all the grants and programs available to you.
The easiest way to do that is to have a mortgage advisor go over all your options with you.
[Tip] Check current mortgage programs in Louisville.
Myth 2: Home buyer programs are for first-time homebuyers only.
Fact: You might qualify as a “first-time homebuyer” even if you’ve owned a home before.
Many seasoned homeowners qualify as first-time homebuyers.
Let’s go over some of the conditions in which you could qualify as a first time homebuyer.
Under FHA guidelines, you’re considered a first-time homebuyer if you owned a home with a spouse, but are now single. This would qualify you as a first-time homebuyer even if the previous house was sold or foreclosed on.
This is a huge benefit if you’re a single parent or a stay-at-home mom or dad who is currently divorced.
Another way to qualify is if either you or your spouse has not owned a home in 3 years. If that’s the case, then both you and your spouse would qualify as first-time homebuyers.
Also, if you’ve owned a mobile home you could qualify as a first-time homebuyer because it’s not attached to a foundation.
As you can see, you can qualify for first-time buyer programs even if you’ve owed a home in the past.
Myth 3: You can’t buy a home with bad credit.
Fact: You can get a loan with bad credit.
Lets say your credit score is 580 or higher. That means you might be able to qualify for the 3.5% down payment program.
At 620 or higher, a lot more options open up for you. But keep in mind there’s no one-size-fits all scenario with mortgage loans.
Your best bet is to speak with a loan officer and find the best loan tailored to your situation.
Myth 4: The loan process is drawn out and stressful
Fact: Not all all mortgage companies are created equal.
You’ll hear horror stories of loan processes taking several months. That’s not really how long it should take. Normally, it’s about three weeks.
If you want to speed up the process, make sure you have some things ready beforehand. For example, your driver’s license. Easy enough, right?
You’ll want to have proof of income like last two paycheck stubs and last two years of tax returns and W-2s.
buying a home is not stressful (or complicated) if you go with a reputable mortgage broker.
Myth 5: You should look for a home before shopping for a mortgage
Fact: Save time and headache by shopping for your mortgage first.
I know, it’s really tempting to scout homes first.
But the fact is, you’re better off shopping for a loan first. The reason is simple.
Many homebuyers don’t think about their mortgage until after they’ve picked out a house. Which could be very disappointing when they find the perfect house and then realize they can’t afford it.
This is especially true after they’ve invested months looking for that perfect home.
Shop for a mortgage first, then shop for a house. That way you know how much you can afford and you’ll save weeks worth of time.
The easiest way to shop for loans is to get pre-approved. That way you’ll know how much you can afford and what your options are. That way you could find the best rate for each option.
Don’t get stuck paying too much for your mortgage.
Get pre-approved now and find out what options are available to you.
Thomas is a personal finance writer from Louisville, KY.