5 Mortgage Myths Dispelled

If the idea of buying a house both scares and excites you, that's how it should be. If you're only intimidated or only enthusiastic, you're probably going into the mortgage-buying process ill-informed.

After all, in the years before the Great Recession, homebuyers weren't intimidated at all. For quite a few years, many people purchased homes that were out of their price range and often on shaky credit, but since lenders didn't seem concerned, homeowners weren't either.

Now, the tide has turned, and prospective homeowners are understandably more leery about making what will likely be the largest purchase of their lives. But maybe they’re too leery. According to a survey of 2,017 adults released last month by Wells Fargo & Co., the country’s largest mortgage lender, many borrowers who can afford a home may be frightened off, believing that buying a house is something they simply can't do.

If you're on either end of the spectrum – squeamish about homebuying or ecstatic with no worries whatsoever – here are some misconceptions about mortgages that may bring you to the middle.

Your credit has to be perfect or near-perfect. Two-thirds of the Wells Fargo survey respondents believed you have to have a very good credit score to buy a house. While there's no doubt that a high credit score will help you get a better loan, it isn't a deal-breaker if your score is middling. If you have some credit blemishes and financial scrape-ups but for the most part pay your bills and make steady income, you probably don't have much to worry about, experts say.

"While credit is scrutinized, some loan types will allow credit scores as low as 620," says Gaye Rowland, senior vice president of SharePlus Bank, headquartered in Plano, Texas. "Other compensating factors such as larger down payments or low debt-to-income ratios can offset some negative credit information. Every situation is analyzed individually."

You must have a down payment worth 20 percent of the purchase price. This, too, is a myth. More than 40 percent of Wells Fargo respondents believed the only way to buy a house was to give a lender at least 20 percent of the purchase price of a house.

Again, it helps to have a 20 percent down payment, particularly if you want to avoid paying monthly private mortgage insurance. But many banks and mortgage companies – especially now that the recession is several years in the rearview mirror – offer loans that don't require a down payment anywhere close to 20 percent.

"We offer many programs that either have 100 percent financing or a 3.5 percent down payment," says Alyssa Schwabe, a spokeswoman for GSF Mortgage, headquartered in Brookfield, Wisconsin.

A house is a great investment. It can be a good long-term investment, but nothing in real estate is guaranteed. Particularly if you plan to live in the home for several years, and you can’t afford to lose a lot of money, you need to think of your house as a house – not a financial tool designed to pad your investments or retirement.

"People tend to purchase their homes with a little bit too much of an investment mentality," says Michael Goodman, a certified public accountant and financial planner at Wealthstream Advisors in New York City. "I'm not saying it isn't part of your overall net worth, but the home purchase really should be for somewhere you're going to live."

He adds that some wealthy homeowners additionally get too caught up in the idea that owning a house is a way to reduce taxes. "People will tell me that they need a tax deduction or a better tax deduction, and so they're going to buy a bigger home. I think that's the stupidest thing I've heard," Goodman says.

Courtesy of: U.S. News

How To Boost A Home's Presentation To Attract Homebuyers

Presentation is one of the three most important aspects determining how quickly a home will sell.

Much like the organic produce piled neatly in handy bins at the grocery store, and the way the makeup is displayed on the mirrored counters at the department store, it is important to be thoughtful and creative regarding the house's presentation during an open house.

Here are three examples of choices to consider to improve the presentation of a house before an open house:

Make sure you are presenting potential buyers with a clean house. The grocery store doesn’t let streaks of ooze and seeds trail down from rotten tomatoes in display cases. The department store doesn’t allow broken chunks of lipstick to linger on the mirrored counters. No way!

They are both cleaned daily if not more frequently.

This must be a similar approach an agent must take before hosting an open house.  Clean the counters, carpets, cabinets, closets, doors, drawers, mirrors, windows, drapes, blinds, and everything else.

It is also important to take note of the other adjustments you may need the homeowner to make in addition to cleaning. As an agent, you need to instruct the homeowner if he or she needs to repair or replace items, remove wall paper, repaint, and/or re-carpet. Noticeable stains, scratches, chips, tears, and gaping holes in the dry wall are mental triggers to a buyer that you’re presenting damaged goods.

Today’s buyers expect perfection, and when the presentation is something less than that, they begin to deduct from their opinion of your house’s value and create resistance to even making an offer.

Stage the home properly. De-clutter and de-personalize are the first steps in this approach. Then you have to arrange and accent. It is critical for an agent to stage the home that is on the market properly and strategically. 

And lastly, as an agent, it is your job to capture the features of the home through photographs. 

A professional photographer who specializes in shooting homes for sale is essential to the presentation of the house.

These pros have wide angle lenses, special flash attachments and those lighting umbrellas.

They also have the know how to shoot the bathrooms without the glare from the mirrors and how to diffuse the blazing sun coming into your kitchen window.

And consider a drone. A video of your sparkling clean, strategically staged house will boost the presentation to the pool of buyers to the next level.

Courtesy of: OC Register