The good news is that the real estate market is making a healthy comeback and home values are rising. The bad news is, people are still gun shy after what happened in the early 2000s. Homeownership is still considered the “Great American Dream” but after the nightmare so many people experienced, investing hard-earned dollars comes with great trepidation. Unfortunately, adding to this environment is a flood of misinformation. Most particularly, false facts about the homebuying process, qualifying for a loan and what is necessary to qualify for a home mortgage leave a heavy cloud of doubt in an otherwise buoyant climate.
FINANCING FICTION
Myths and misconceptions create some of the greatest barriers among would-be homebuyers. As a real estate agent, this is where your expertise becomes particularly crucial. Erroneous information abounds in virtually every aspect of the homebuying process, but the most harmful are those that involve money.
One of the biggest misconceptions, and one that we encounter frequently with our clients, is the idea that a down payment must be at least 20 percent of the purchase price. Unfortunately, this number frightens away many buyers who in actuality would qualify for a mortgage. The reality is that, in most cases, the minimum required for a down payment for a primary residence is only 3 percent!
In addition, there are many programs designed to assist with the down payment, the problem is most people aren’t aware of these.
For example, there are several down payment assistance programs that make funds available to buyers that cover all or part of that minimum 3 percent down payment. These come in the form of a grant or a “forgivable” second mortgage. These programs are typically geared toward the first-time homebuyer; however, some are available to anyone.
SEPARATING FACTS FROM FICTION
If your client thinks this sounds “too good to be true,” rest assured they are regular, government backed, non-subprime loans. Furthermore, these programs are available through both conventional and FHA financing. The bottom-line is that it is possible to buy a home using one of these down payment assistance programs with virtually no out-of-pocket money for the buyer.
Other programs feature loans with a remarkable 0 percent down payment. Of course, these are more specific to particular groups and have additional requirements the buyer must meet in order to qualify. These include:
VA LOANS
- Exclusively for veterans and their spouses.
- Active duty military may qualify depending on time served.
- 100 percent financing with 0 percent required down payment.
USDA LOANS
- Offered through the USDA Rural Housing Development program.
- 100 percent financing with 0 percent required down payment.
- There is one caveat: property must be in a USDA eligible area.
As you can see, there are many loan options available for buyers. Because so many people in the homebuying market have limited information while at the same time are inundated with myths and half-truths, it’s imperative that you are armed with correct and up-to-date information to reassure and guide them through the process.
My team and I are always available to provide accurate information, debunk myths, and even answer your questions regarding specific buyers and transactions. You’ll be a hero to your clients when you take the fear out of home financing and bolster their confidence in their purchase – we can help make that happen!
