| The home buying process can be very confusting. | | | | advance on your credit card or an unsecured personal |
| Take a few moments and dispell some of the top | | | | loan as a down payment. You can't borrow your |
| myths surrounding this process. | | | | down payment from friends or family, either. But, there |
| Myth # 1: You can't use a gift as a down payment. | | | | are a number of types of loans that are perfectly |
| This old saw has been around for decades, but it's not | | | | acceptable to use as a down payment. |
| true! You can use a gift from a family member or a | | | | These include loans against your retirement account, |
| non-profit foundation for a down payment. Lenders | | | | such as a 401K. In fact, this is one of the most popular |
| have found that new homeowners are especially | | | | sources of a down payment. If you have valuable |
| motivated not to default on their mortgage, when a | | | | possessions, such as art, jewelry, stocks or an |
| family member has invested in the property. | | | | investment account, you can use those as collateral |
| If you accept a gift as part of the down payment, your | | | | for a down payment loan. These are called pledged |
| lender may want written proof that your relative is not | | | | asset loans, because you are pledging your assets to |
| expecting you to repay them. This is usually in the | | | | guarantee payment. |
| form of a letter or gift affidavit. | | | | Myth # 5: Down payment assistance programs are |
| Myth # 2: You must have perfect credit to buy a | | | | only offered in the inner city or blighted neighborhoods. |
| home. | | | | Nothing could be further from the truth. There are |
| There is an entire segment of the mortgage industry | | | | thousands of different DPAPs or Down Payment |
| built up around providing loans to people with less than | | | | Assistance Programs available in different areas. |
| perfect credit. It's called the sub-prime mortgage | | | | Many of them are offered by city, state or local |
| segment. Yes, it's true that sub-prime mortgages are | | | | governments. Others are nationwide. Still others are |
| usually at higher interest rates than conventional | | | | offered by non-profit foundations. |
| mortgages. However, usually you can refinance in a | | | | Myth # 6: You must have at least a 20% down |
| few years when your credit rating has improved. | | | | payment. |
| Myth #3: You can't buy a home for at least 10 years | | | | This was true before 1934. That's when the |
| after declaring bankruptcy. | | | | government first started offering VA and FHA loans |
| If you reestablish your credit, you can qualify for a | | | | with down payments as low as 3% to 5%. Today, |
| conventional home loan in as little as 4 years after | | | | there are dozens of different loan products available. |
| declaring bankruptcy. For government loans like those | | | | Some require down payments as low as 5%. Others |
| sponsored by the VA, the wait is even shorter. You | | | | require no down payments at all. They're called 100% |
| can qualify for an FHA loan in as little as 2 years. | | | | financing, where you borrow the down payment as |
| Myth # 4: You can't use a loan for a down payment. | | | | well as the mortgage amount. |
| Actually, this myth is partly true. You can't get an | | | | |