This letter is for anyone that dreams of having their own home, but because of inaccurate information or misconceptions in regards to purchasing, they just don't bother to try or have tried in the wrong places. With the sub-prime lending meltdown and foreclosures on almost every headline and news reports today, a lot of people are just plain scared of home ownership. I want this article to help clear up a lot of the confusion and let people know there are still great mortgage programs out there today. This is a great time to be buying real estate and people can still obtain financing with little or no money down.

The top misconceptions that people have in purchasing a home, in my opinion, are the following:

•1)     "My payment will be higher owning a home than if I were renting."

•2)     "I need to have a lot of money out of pocket to purchase."

•3)     "I need to have perfect credit to avoid high and/or adjustable rates."

•4)     "I would have to pay large annual tax and insurance bills if I owned."

Now, the statements above are perfectly normal and I actually had the same concerns as a first time home buyer. But next, I will explain how it actually is:

•1)     "My payment will be higher owning a home than if I were renting."

True, the payment could be higher, but you are in control of that by what price house you decide to purchase. Here are some examples based on 7.00% fixed interest rate and a 30 year term:

•·        $100,000 - $665.30/mo Principle & Interest

•·        $110,000 - $731.83/mo Principle & Interest

•·        $120,000 - $798.36/mo Principle & Interest

•·        $130,000 - $864.89/mo Principle & Interest

So you can see, based on this example, your payment changes about $67/mo for every $10,000 increase or decrease in loan amount. But, the good news is, you are in control of it. Another thing to keep in mind is that someone owns the home you are renting, has a mortgage payment, and usually rents it for more then the payment to make a profit. So buying would normally mean a decrease in payment on that particular house.

•2)     "I need to have a lot of money out of pocket to purchase."

There are mortgage loan programs out there that do require a larger down payment, like investor loans or construction loans. But, mortgage loans for the home you will live in as your primary residence have loans that go up to 100% financing, so no down payment. Below are a few of the best loans out for primary residences:

•·        FHA Loan- Up to 97% financing. Traditionally you would need 3% of your own money down, but the good news is that the FHA allows gift money from family for the 3%. So FHA can actually get you in a home with no down payment. This is the best loan out for the average citizen. There is no income limits, good fixed rates, low MI payments, and allows up to a $303,950 loan amount in Cabarrus & Mecklenburg counties.

•·        VA Loan- Up to 100% financing. Excellent loan program and it has no mortgage insurance. But, to qualify you would need to have been in the military and been issued a VA loan entitlement certificate. Great program! There is no income limits, good rates, and it will allow you to go up to a $417,000 loan amount. The only catch is, you have to be military.

•·        USDA Rural Loan- Ok, you probably are thinking, "I would have to live out in the sticks to qualify for a rural loan, like a pioneer or something." Well, you would be surprised how close you are to a rural area. There are even Charlotte addresses that are actually considered eligible for a USDA loan. They allow for 100% financing and no MI. This is one of the best kept secrets in mortgage financing today, but you have to make sure that the address qualifies. You can go to http://eligibility.sc.egov.usda.gov to see if the address and household income qualifies. Another great loan program! There is no MI, no down payment, low fixed rates and no maximum purchase price. You do have an income limit and is around $60,000/yr for Mecklenburg County.

Ok, so that takes care of the down payment issue. Now, what other costs are involved in purchasing a home? Well, there are closing costs, pre-paid items, earnest money, and inspection fees. Here are some estimated costs:

•·        Closing costs: This will typically be around $1500 - $3000 depending on the size loan. The costs include bank fees, attorney fees, etc.

•·        Pre-Paid Items: This will typically be around $1000 - $2500 depending on what the taxes, hazard insurance, and interest rates are.

•·        Earnest Money: This typically will be between $250 - $500 depending on what the seller will accept and the price of the home. Usually you can get this back at closing.

•·        Inspections/Appraisal: There are various types of inspections, but the normal are building inspections, termite inspections, and appraisals.

Usually, all closing costs and pre-paid items can be negotiated into the purchase price. The only out of pocket costs would be your earnest money deposit and the appraisal cost of around $350. So, that takes care of the large out of pocket expenses you were worried about.

•3)     "I need to have perfect credit to avoid high and/or adjustable rates."

There are definitely guidelines when it comes to credit requirements to get approved for a mortgage. But the credit standards that you may think, compared to what they are might surprise you. There is "No Minimum Score" for FHA, VA, or USDA, but normally you need at least a 580 score. Even with collections or late payments, there is still a possibility to get pre-approved without having to pay them off. You can't have a foreclosure or bankruptcy in the last two years. And you will still need to qualify with income. But, with good reasons and explanations, exceptions can be made. Below is an estimated range of credit scores and what 30 year fixed rates you could expect:

•·        580-599: 6.75% to 7.25%

•·        600-619: 6.50% to 6.75%

•·        620-659: 6.25% to 6.50%

•·        660-850: 5.75% to 6.25%

Keep in mind that all these rates are 30 year fixed not adjustable. And of course, rates are subject to change depending on where the market is and when exactly you lock. But, this will give you a good estimate and help you realize that we are not talking about the 12% adjustable rate horror stories that you have heard about. Also, if you do get turned down for credit at this time, which can happen, we will help set up a game plan and point you in the right direction to restoring your credit.

4) "I would have to pay large annual tax and insurance bills if I owned a home."

You will have real estate taxes and hazard insurance when you purchase a home. And they typically are due annually. However, with most mortgages you have the option to "Escrow" both your taxes and insurance. Escrowing does not eliminate your annual bills, but breaks those annual amounts into a monthly amount that you pay with your mortgage payment. So your mortgage payment would include your principle and interest payment, escrows, and mortgage insurance if applicable. For example on a FHA $100,000 loan, 6.50% interest rate, 30 year term, $1000/year taxes, $400/year hazard insurance, and standard FHA mortgage insurance you would have the following payment breakdown:

•·        Mortgage Payment: $632.07/mo

•·        Real Estate Taxes: $83.33/mo

•·        Hazard Insurance: $33.33/mo

•·        Mortgage Insurance: $45.83/mo

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Total Mortgage Payment: $794.56/mo

Compare that to where you are renting now. Not too bad, huh? And, this does not even include the tax write offs for all the interest, mortgage insurance, and taxes that you pay on your home. Check with your tax accountant, but that could be thousands of dollars in tax savings every year! Not to mention that every payment you make, a portion of that payment goes towards the balance you owe on the house. In a normal and healthy real estate market, your balance goes down and the value of the house goes up. This creates, in my words, a "Real Estate Savings Account". You could sell your home in the future and make a profit. Or you could pull some of that money or "Equity" out of the house and pay off bills, pay towards college, upgrade your house, or whatever you want. It's your money, it's your equity, and it's your house!

Well, that about wraps it up. I hope after reading this letter, you will have a new outlook on owning your own home and the process that goes into it. Feel free to visit my website at www.keyfinancialus.com for more information and mortgage calculators for your actual scenario. Let work together to show people that this is a great time to purchase real estate and the means to do so are still in tact. Please let us know of any other misconceptions that you could share that were not mentioned here so we can help people make accurate and factual decisions.