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Top Common Myths About Mortgages


By Dean McCarthy

As a mortgage broker, I find that people who are in debt, and those who are looking to purchase a home after being in debt, often have misconceptions and myths about how mortgages work, and these can cost a lot of money and aggravation to those looking to purchase a home. Don’t let these myths deter you from getting your dream home, and having the knowledge of how they work will put you in a much better position to get it.

Myth #1: Prequalification means you have a guaranteed loan

It’s always advised to get prequalified before looking for a home. This helps you and your realtor know the ballpark figure you’re working with for a home to purchase. The prequalification process, of course, requires your income and credit to be evaluated. However, lenders don’t dive deep into all assets and debts. So no financial lender can guarantee you this loan amount.

What I find confuses people is that prequalification and preapproval aren’t the same thing, although many people think they are. If you get a preapproval, your lender goes through all your finances with a fine-toothed comb. This amount is just as good as guaranteed. However, your credit and finances could be reevaluated at any point before they close on your mortgage, so you do have to continue to keep your credit and finances in good order.

Myth #2: You need to have 20% down before you can purchase a home

To be honest, you want to have a decent sized down payment available when you purchase a home. The myth that you need to put down 20% before you can purchase a home was for the purchaser’s benefit. That’s because for many loans, putting down anything less than 20% would increase your interest rate and require a Private Mortgage Insurance (PMI) to be automatically added to your mortgage loan, costing you thousands to tens of thousands more over the life of the loan. However, now with more people qualified for the Federal Housing Administration (FHA) loan, you can qualify for a mortgage loan with just 3.5% down. While I believe you should still shoot for that 20%, it’s important to know there are other options if you come across your dream house before you have that 20% saved up.

Myth #3: The FHA is the mortgage lender

Another misconception I come across is that the Federal Housing Administration is an actual mortgage lender. This is not true. They are a government agency under the U.S. Department of Housing and Urban Development. What they do is offer mortgage insurance stating they will back up a loan that a financial institution makes. So any losses such as a foreclosure or short sale of a property funded by an FHA loan would be reimbursed by the FHA to the lender.

Myth #4: You need a high credit score to be eligible for FHA loans

Here, again, I think everyone should get their credit score as high as possible when considering a purchase of a home. While most mortgage loans do require good credit, this isn’t true in regard to FHA loans. Credit scores are not a factor when it comes to being approved for an FHA loan. These loans initially started as a way for those with no or low credit and low income to be approved for loans to live the dream of home ownership. Lenders must go through the applicant’s entire credit history on file and not just pay attention to a few late payments. These loans are even available for those with prior short sales, foreclosures, or a bankruptcy. Let me be clear, not everyone with poor credit will be approved, but if you have been taking steps to improve your credit, your chances are greater for approval than with a conventional mortgage loan.

As a broker, having the correct information is important to making a good decision which fits your circumstances. You want to be in the best financial and credit position possible when applying for a home loan, but you also don’t want to lose out on a great opportunity because you think something can’t be done when it can.

How to Make College More Affordable: An Insider’s Perspective


By Gina Stewart

As a higher education advocate and counselor, I have helped many people, ranging in age from high school graduates to adult professionals, enroll in higher education, only to see them get in way over their heads when it comes to finances. Pressured to meet enrollment numbers, admissions advisors are often guilty of selling the my kids and clients “the dream” without painting a realistic picture of the financial burden that they’re going to saddle these students with after graduation.

Here is what I tell my kids and clients: College, at any level, is expensive. Anyone selling you the dream of higher education without also providing an accurate accounting of the costs and associated difficulties, is doing you a disservice. While I will not share with you the horror stories I have witnessed in an abusive and unchecked system, I can give you some advice on how to spend as little of your money as you can to get the best return on investment possible.

Here are the most important pieces of advice that I offer to every hopeful student I work with:

Get a Degree that Pays

The most important advice I can give to anyone running the financial aid gauntlet is to get serious about the investment, and choose a degree that will pay off in the end. While it is great that many schools offer degree programs in subjects like art history and music appreciation (I majored in music theory and composition so I know whereof I speak), these programs aren’t going to help you get hired outside of your field.

It is better to get your degree in a field that pays well from a school that has a solid track-record of placing students in jobs within the first six months of graduation.

For example, I helped one of my kids enroll in the radiation therapy bachelor’s degree program offered at Gwynedd Mercy U, located here in Pennsylvania. I explained that radiation therapy is a degree that she could carry with her wherever she went and, if she wanted to further pursue medicine or health would pay her enough to help fund that education while simultaneously giving her a leg up on her fellow students. Whatever university and degree combo you choose, make sure it is one that has a good chance of paying off (and that travels well).

Online University

If you are still carrying some doubt about the efficacy of online universities, get over it. When I was an admissions advisor for a major online university back in the day, I understood people’s reticence about joining the program. Today, though, we live on the internet and recent high school graduates are literally younger than household access to the web.

Many of the degrees that are now available online can lead to some highly lucrative careers in a variety of different industries. For example, you can complete a nursing degree online, which puts you on the fast track to paying for your education and earning a very nice living. There are always jobs available in the nursing sector, as hospitals, private clinics, and many other facilities require trained workers. The industry is expected to grow by 22 percent by 2018, since the country’s population is aging, giving you even more chances to find a great job.

Here’s what I told a man who had been downsized out of his retail management position: At the end of the day, you are going to get a solid education at an accredited school, and land a job that pays well. Your interviewer will not disregard your application because you went to a school with an online component. He went after a business degree from one of the most well known online schools in the country and now he’s making three times what he used to make.

Get on the Fast Track

Another thing that I tell everyone I work with is this: If you have the option to get it done quickly, get it done quickly. The longer you are in school, the more it is going to cost you. It’s good to look for programs that have an accelerated option. If you already have some college credits, see if you can CLEP out of the core. That could save you two years, and thousands of dollars. One of my students was looking to transfer from a community college to a four year university. We found her an accelerated program that let her finish the last two years of her bachelor’s degree in just one year. Her current employer was impressed that she took such initiative and even listed it as part of the reason my client was hired!

Let’s face it: College is expensive. But if you do it right, it is one of the best investments you will ever make.