Debunking Real Estate Myths

A recent article on Trulia described widely-held myths about the real estate market. Here's my take on it.

1. Myth: Buyers with bad credit can’t qualify for home loans.
Even though requirements have tightened up considerably, recently, they seem to have relaxed a bit. A couple of the largest lenders of FHA loans announced that they’ve dropped the minimum FICO score guideline from 620 to 580, which is actually a fairly low score, but they are expecting a 5-10% down payment with these lower scores.

2. Myth: The Mortgage Interest Deduction isn’t long for this world.
The National Commission on Fiscal Responsibility and Reform caused a massive wave of fear when they recommended Mortgage Interest Deduction (MID) reform, which would dramatically reduce the size of the deduction.
Fact is, the Commission made a huge set of recommendations to Congress, but only a few are likely to be adopted. MID reform is not one of them, since economists and industry groups are convincing Congress that MID reform any time in the near future would handicap the housing recovery.

3. Myth: It’s just a matter of time before loan guidelines loosen up.
It’s possible that loans are as easy to get as they’re going to get. Zero-down mortgages won't be coming back anytime soon. If you want to get into the market, the time to get yourself ready is now!

4. Myth: If you don’t have equity, you can’t refi.
If your loan is held by Fannie Mae or Freddie Mac, they will actually refinance it up to 125% of its current value, assuming you otherwise qualify for the loan.
My niece and her husband recently refinanced their "underwater" Florida home.
If your loan is not owned by Fannie or Freddie, you might be a candidate for the FHA “Short Refi” program. While most mortgage workout plans are only available to people who are behind on their loans, FHA's Short Refi program is available to homeowners who are current on their mortgages and need to refinance up to 115 percent of their homes’ value.

5. Myth: If you’ve lost your job and can’t make your mortgage payment, you might as well mail in your keys.Until recently, this was essentially true, but there are some new funds available in the states with the hardest hit housing and job markets, which have been designated specifically for out-of-work homeowners.