Mortgage myths busted: what's actually true
Four things borrowers hear that aren't quite right. You usually don't need a huge down payment. Self-employed write-offs don't have to block you. Rental income can qualify you. And you don't always have to refinance to use your equity.
Myth 1: "You need a huge down payment"
Not usually. FHA, VA, USDA and some conventional programs have low down payment options, and there are DPA programs all over Florida that can help with the down payment and closing costs.1 A bigger down payment can lower your costs, but it isn't the only way in.
Myth 2: "Self-employed write-offs mean you can't qualify"
Write-offs lower the income on your tax return, which is what most loans use. Bank statement loans use your business or personal deposits instead, so good tax planning doesn't have to cost you a house. If your return already supports the loan, a conventional loan is usually cheaper, and I'll tell you that.
Myth 3: "You need W-2 income to buy a rental"
A DSCR loan qualifies on the property's rent instead of your personal income: rent divided by the full monthly payment. In Florida the insurance quote often decides whether that ratio works, so get a real quote early.
Myth 4: "To get cash from your home you have to refinance"
A HELOC is a line of credit that sits behind your current mortgage, so your first mortgage and its rate stay in place.2,3 A cash-out refinance replaces your mortgage with a bigger one.3 If you have a low rate today, that difference matters.
The honest counterweight
None of these myths are always wrong. A bigger down payment can still be the cheapest path if you have it. Assistance is a second mortgage, not a grant. Non-QM loans cost more than conventional ones. And a HELOC is secured by your home. The right answer depends on your file, and I'll show you the options side by side.
Frequently asked questions
Is a big down payment ever the better choice?
It can be. A bigger down payment can lower your costs and avoid a second mortgage. If you have it, I'll show you both paths side by side.
Do bank statement loans cost more?
Usually, yes. They price above conventional loans. If your tax return already supports the loan, conventional is usually cheaper.
Does a HELOC replace my mortgage?
No. A HELOC sits behind your current mortgage. Your first mortgage, rate and balance stay in place.
Is any of this guaranteed to work for my file?
No. Every program is subject to credit approval, underwriting and appraisal. I'll tell you straight if a path doesn't work.
Tell me what you heard.
Send me the myth or the situation. I'll tell you what's true for your file, with no credit pull to start.
Serves all of Florida and works with real estate investors nationwide. Born in Puerto Rico; Spanish is his first language. Teaches the mortgage session at Tampa Bay NHS homebuyer classes.
Sources and further reading
- Florida Housing Finance Corporation, Homebuyer programs. www.floridahousing.org
- CFPB, What is a home equity line of credit (HELOC)?. www.consumerfinance.gov
- CFPB, What other types of loans are similar to a HELOC?. www.consumerfinance.gov