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Over the years, I have come across quite a few mortgage loan myths. Here are some of them, together with the correct information.

Too Old To Qualify

Some people hold off applying because they believe they will be told they are too old to qualify for a loan, particularly one that will last 30 years as is typical of a mortgage. The reality is that lenders are prohibited by law from making credit decisions based on age. As long as you have the capacity to enter into a contract, you are eligible. Decisions based on  income are perfectly normal and routine.

I personally have helped clients in their 50s buy their first home. They would not be paying-off the the loan until they are in their 80s. I even know one lady who would not be paying-off the the loan until she is in her 80s yet she bought herself a home. And financed two rental homes for additional income at the same time! Clearly age is not a factor in granting credit.

Source of Income

Another question I get frequently is “Can I qualify as I am on Disability?” If your income is as a result of permanent disability, then it will be considered in the loan decision. If the disability is temporary and the expectation is you will return to work, then the temporary income will generally not be eligible for consideration for a mortgage loan.

Similarly, people who are getting child support and/or alimony can have it count as income, as long as it will continue for at least 3 years into the future.

Recent Graduate

Graduates in a field with professional prospects, such as nurses, mechanics, doctors, etc, can qualify for a mortgage loan even if they have been employed for less than two years. So establish a track record at your employer (a few months minimum) and then you can start your search for a home and a loan to buy it.

Not Enough/No Down Payment

While a mortgage loan typically requires a down payment, the borrower does not always need to save up this money. Some loans allow the seller or relatives of the buyer to make the down-payment. Also, there are grants available to help cover the down payment. Borrowers should also be aware that some grants do not even require the borrower to be a first time buyer.

Low Credit Score

Some people forego seeking a mortgage loan because they tell themselves their credit score is too low. There are government-insured loans for people whose credit score is as low as 500. For people whose score fell below 500, there are private lenders. One thing all borrowers must understand is that they have to show enough income to be able to make the monthly payment. Beyond that, there is an inverse relationship between credit score and down-payment. That is to say, the lower your credit score the higher your down-payment will need to be.

Too Much Income

Some people believe they are disqualified because they make too much money to qualify for down-payment assistance. In fact, some grants cover people well into the upper income brackets. There is even a program where income does not have an upper limit. And this particular program is not limited to certain areas (for example rural areas, areas undergoing redevelopment, areas hard-hit by a natural disaster, etc). Where you want to live is up to you.

As you can see, there are plenty of myths holding people back needlessly. If you’ve heard someone say you can’t get a loan because… (fill in the blank), let me know and I will write a follow-up article addressing the mortgage loan myths causing your concern(s). Simply contact me at 760 622 5087 or [email protected] and let me know what you have heard.