Millennials today have yet to enter the home buying market. While it might be understandable why a 20-something isn’t ready to buy a home, but those approaching 30 years old, may still have some reservations partly because they’re getting some bad information from somewhere. Or, they’ve simply formed their own opinions without enough solid data. Let’s look at seven myths millennials believe about mortgage lending.
1. You have to have perfect credit. You don’t have to have perfect credit. In fact, borrowers can have what some might refer to as just “average” credit. That translates to a credit score somewhere in the 620 range and not 750 or above.
2. You have to have a big down payment. Not true. The most-used mortgage loan program for first time home buyer is the FHA program which requires a less than 4% down payment of the sales price of a home.
3. Closing costs are too expensive. There are closing costs associated with all mortgage loans but lenders can craft a program where the buyers receive a lender credit that goes toward a buyers’ closing costs and in many cases the credit pays for all their non-recurring fees. Sellers can also contribute up to 4.0% of the sales price that can be applied toward an FHA mortgage.
4. Co-borrowers are no longer allowed. Surprisingly, this is a myth that probably originated with conventional mortgage loan changes in the 2000s. Co-borrowers are certainly allowed and with certain programs can have their related non-occupying coborrowers pay for nearly all of the mortgage payment alone.
5. Only those who don’t need a mortgage can get one. There may have been a time where it was nearly impossible to get a mortgage but that was right in the middle of 2008 when the housing crisis was at its worst. Lenders recovered and are making mortgage loans each and every day.
6. You can’t get a mortgage with a bankruptcy in your credit history. Again, not true. Mortgage programs can allow for a brand new mortgage in as little as three years since a bankruptcy discharge.
7. Mortgage payments are too high. The way mortgage rates are today and rental demand across the country on the rise, it’s probably cheaper to pay a mortgage than rent. Don’t assume that a rental payment is the better option.