Myths of home-buying aren’t always true
If you’re a hard-working local who is just plain tired of renting, you might find that buying a home isn’t as impossible as you might think. It may not be as easy as you’d like, but what is in life?
Most of us have a few tales to tell of what it took to get here in the first place, but if you’ve been around and stuck out the first year or two to get your life established, chances are you decided that those trials and tribulations were worth it to live in this great little valley ” and shouldn’t the next step be owning a piece of property here?
The first myth is that you have to have 20 percent down to buy a place. WRONG! Depending on the property you buy and your qualifications, you might be able to buy a place for as little as 0 percent down. Not everyone can qualify for the zero-down programs, and you will pay a higher rate, but it can be done. You will have to come up with money for closing costs to go zero down, and that can be several thousand dollars. With zero down payment you will also have to have pretty good credit and a established job history.
If you don’t qualify for zero down, the second myth is that you have to come up with a lot of money for closing costs in addition to the dowpayment. WRONG AGAIN! Real estate deals are structured all the time to finance closing costs. Not all lenders and realtors know how to do this, but I can explain it to you or your realtor in about three minutes how to incorporate the correct language in the contract to do this. It must be set up properly from the outset, but it can be done.
The next myth is that you have to have had the same job for at least two years to qualify and that income from a second job won’t count. USUALLY WRONG! If you work consistently in the same field in a job such as housekeeping, retail sales, or waiting tables but for different establishments we can usually count all your income. If you have consistently worked two jobs in different fields that is generally OK as well.
If, however, you have switched careers entirely a few times, or just relocated here and started waiting tables after, say, running a division at IBM, then you may have a problem getting a loan even though your blood pressure dropped 20 points. Make a list of your employment history and your income from each job and call your lender to talk about this one. They may or may not be able to work through this issue, but a good loan officer will try.
Another myth that people would like to believe that I must caution you about is that having a parent or rich friend co-sign for you solves all your problems in qualifying. WRONG! This used to be the case, but in most instances the occupying co-borrowers (that’s you) have to qualify for at least a portion of the payment.
One popular option is for friends to go together and pool their resources to qualify. I’ve seen this work well and work badly. The key is to hope for the best and plan for the worst. Sit down with your friend and discuss what will happen to the property if the time comes when one of you wants to move on and the other doesn’t. Get a lawyer and put it in writing. You’re talking about a 30-year loan here, and these days most marriages don’t even last that long. And while there is plenty of legal precedent to splitting up property between married couples, most of the parties involved walk away unhappy at the outcome. Unmarried couples or friends are on their own in determining such matters if they do it ahead of time. Otherwise the court may decide for you, and probably nobody will stay friends.
Eagle County has a vastly improved down payment assistance program that might help also, depending on your qualifications. The guidelines have been greatly expanded to help a lot more people get into homes.
There are a lot of pieces to the puzzle to put together. Getting your financial plan should be among the first things you do. That way when you find the right place you can be confident you are ready and you know what you can afford to buy.
Chris Neuswanger is a mortgage loan officer with Macro Financial Group in Avon and welcomes mortgage-related inquiries from readers. He may be reached at 970-748-0342.