It’s the last full week of October, which means that it is also the last full week for everything spooky — ghosts, goblins, Freeform’s 31 Days of Halloween…. And another day thinking about that mortgage payment.
While ghosts and goblins may always be frightening, you should know that you don’t need to be afraid of your mortgage payment. There are a lot of rumors and scary stories floating around about mortgage payments, and just like any tall-tale, these anecdotes have made mortgage loans seem much more intimidating than they actually are.
To shed light on these stories, Joe Massey, a Senior Loan Officer at Your Castle’s preferred lender Castle & Cooke Mortgage shared 13 of the most common myths surrounding mortgages and the truths behind the lore.
Myth 1: Pre-qualification and pre-approval are the same thing.
Fact: These letters are completely different. Pre-qualification can be completed very quickly with only verbal information. Pre-approval requires all of your written documentation and is a much more serious letter.
Details: You can receive a pre-qualification letter online based on your estimated credit score. This letter is not worth the paper it is written on. If you are serious about buying a property, get with a reputable lender and provide your information so they can underwrite your loan and give you an accurate decision.
Myth 2: Your credit score will go down when your credit is pulled.
Fact: If you want to apply for a new loan, your lender will need to pull your credit. Your score may go down by 1-3 points, it may stay the same, or it may go up. Credit is a snapshot in time and it changes every day, and may go up or down due to numerous factors.
Details: If the difference of 1-3 points on your credit is enough to disqualify you for the loan, then you are too close to the edge and you should not be buying a property anyways. Take your finances and your borrowing seriously and let your lender view your credit so you can see what you are really working with.
Myth 3: You must have perfect credit to receive a new loan.
Fact: You do not need a 740+ fico to qualify for a new loan.
Details: We will lend down to a 620 fico score and can go down to a 580 fico no a case-by-case basis. Of course, if you have a lower rate, you will pay a higher interest rate, but it may still make sense to do the transaction depending on your overall circumstances.
Myth 4: I have a great credit score, so I should be able to qualify for any loan.
Fact: Your credit score is only one of the factors that we look at.
Details: A great credit score is certainly a good start, but many considerations go in to your loan approval. Your lender will also review your income, assets, credit history, collateral, and any other factors relevant to the loan and your personal qualifications.
Myth 5: I have bad credit, so I’ll just get a co-signer so I can get approved.
Fact: a co-signer’s good credit doesn’t make any impact on your bad credit.
Details: Co-signers can help improve the income and assets on a loan, but we review the credit of all borrowers on the loan and all borrowers need to meet the minimum 620 fico.
Myth 6: I need 20% down to buy an investment property.
Fact: You can buy an investment property with 15% down, 20% down, 25% down, or more.
Details: Many investors select 25% down because that gets the lowest rate and lowest closing costs. However, 15% down can still make sense, even with a higher rate and mortgage insurance. Less money down allows you to stretch your funds to buy more properties.
Myth 7: I have four properties, so I can’t buy any more properties.
Fact: You can get a conventional loan on up to 10 financed properties (primary + nine investments). After 10 properties, there are portfolio lenders who can give you additional commercial loans.
Details: Most lenders do have a cap of four financed properties, but Castle & Cooke Mortgage will allow you to finance up to 10 properties on a fixed rate loan and other lenders can do commercial loans for properties 11+.
Myth 8: I can’t take cash out of my rentals because I have more than four properties.
Fact: Most lenders will not help you finance more than four properties and certainly will not give you cash-out on more than four properties. However, some lenders will do this.
Details: Castle & Cooke Mortgage will help you finance 10 properties and we’ll let you take cash out of all of your properties up to 75% on investment properties and 85% on your primary residence.
Myth 9: I’m self-employed, so I can’t get a new loan.
Fact: 30 percent of our clients are self-employed and we lend to business owners on a daily basis.
Details: Review your tax returns. If you don’t make and report any money, that is a problem. If you make and report your income to the IRS, ten we can definitely help you.
Myth 10: You must have a job to get a loan.
Fact: 100% incorrect. We lend for MANY clients that do not have jobs. What you must have is income.
Details: The income that you receive can come in many forms and does not have to be a job.
- Social security
- Rental income
- Child support
- Military retirement pay
Myth 11: All of my income is from my rental properties, so I can’t qualify for a new loan.
Fact: Lenders will absolutely use your rental income to qualify you for a new mortgage. However, you need to make sure that you are reporting that income on your tax returns.
Myth 12: I can’t buy a rental property because I don’t have enough income to qualify for the new payment.
Fact: We will give you credit for the estimated rents on the new property.
Details: The appraiser will complete a rental comparable report and provide an estimated rental rate for the property. We will apply a 25% reduction to account for repairs, maintenance, vacancy, and management. Then, we will give you credit for the 75% of the rent amount towards the new monthly payment.
Myth 13: The lowest rate is always the best deal.
Fact: You need to look at the entire scenario and all terms of the loan to determine which is the right scenario for each transaction.
Details: Interest rates are only a portion of the loan costs. You should look at all terms, costs, variables, fixed periods, closing times, payment terms, down payment requirements, qualifications, etc.
If you are someone who enjoys scary stories and spooky Halloween antics, then I’m (not) sorry to tell you that you will not find anything creepy about a mortgage.
Applying for a mortgage loan does not have to be a terrifying experience. Work with a lender that has experience in the product that you need (investment, FHA, conventional, portfolio, etc.) and make sure the lender has a good process to get you through quickly and with as little pain as possible.
Castle & Cooke Mortgage offers services for all of the above, and much more. If you have any additional questions on mortgages or myths that weren’t addressed, do not hesitate to reach out to Joe Massey and his team of mortgage experts. They will help to ensure that all of the mortgage tricks can turn into treats this Halloween season.