Common Myths about Financing

Myth
I had some debt several years ago and I ruined my credit. I'll never get a mortgage.

Reality
You don't know what your credit history shows until you look. And if you do have blemishes from the past, even bankruptcy, many lenders will overlook problems if the past two years show good credit practice on your part.

Myth
I heard you need to put 25% down to buy a house. But my friend says that you can get a mortgage with no down payment at all!

Reality
Both scenarios are uncommon. There are a variety of financing programs available these days, including 100% financing. It is easier now than ever to buy a place without having to save a huge sum. The Federal government realized one of the biggest hurdles for first time buyers was the down payment requirement. Through Fannie Mae and Freddie Mac, this requirement has been reduced substantially. Lenders also realized a big down payment does not necessarily mean a better risk for them. A more important indicator is your credit score.

Myth
I should find a new home first, before I sell the one I now have.

Reality
If you find a buyer for your home first, you'll have more negotiating power in both the sale of your current home and the purchase of a new one.

Myth
I just made an offer on a house I love, but so did several other people. I'm worried that someone else will outbid me and get it.

Reality
Different sellers are motivated by different things. In addition to price a seller will look at the other terms of the offer, contingencies, closing date and required repairs. Many times, a "clean" offer from a pre-approved buyer will be more attractive, even if the price is slightly lower.


Myth
Assessed value should equate to market value.

Reality
While most states assume that assessed value approximates market value, this often is not the case. For example, differences occur when interior remodeling has been done and the assessor is unaware of it, or when properties in the vicinity have not been reassessed for a long time.

Myth
Market value should approximate replacement cost.

Reality
Market value is based on what a willing buyer likely would pay a willing seller for a particular property, with neither being under pressure to buy or sell. Replacement cost is the dollar amount required to reconstruct a property in-kind, given that the land cost has not changed.

Myth
Appraised value and assessed value are the same.

Reality
Not so. Appraised value is a knowledgeable and researched opinion of a property's market value based on an appraiser's knowledge, experience, and analysis of the property and the community where it's located. Assessed value is the valuation placed on a property by a public tax assessor for purposes of taxation.