SANTA CRUZ (June 27, 2009) - There is no doubt about it, the mortgage industry is complex and downright mysterious and yet virtually everyone who owns a home or wants to own a home must deal with it. It never ceases to amaze me when I hear of all of the ways the facts and figures involved in our industry get so convoluted and misinterpreted. Let’s look at some of the most popular myths.

Myth #1) Borrowers cannot spend more than 33 percent of their income on their mortgage payment. This was the rule when I started originating loans over 20 years ago. Today, loans are approved with automated underwriting software and, depending on loan-to-value ratios, we are getting approvals that allow borrowers to spend up to 65 percent of their gross income (not take-home income) on their house payment. More often than not, the mortgage industry will allow borrowers to spend more money on their mortgage payments than their budgets allow.

Myth #2) FHA loans have income restrictions and/or they are for first time homebuyers. There is no minimum or maximum income, the only restriction is that FHA loans are just for owner-occupied properties. If the borrower subsequently moves out, it is OK for the home to be tenant occupied.

Myth #3) Mortgage money is scarce and hard to come by. Actually, it is precisely the opposite. There is no shortage of money available for mortgages as witnessed by increasing home sales and the 2009 refinance boom. For those who have documented income, mortgages are readily available. The perception that mortgages were once much easier to obtain originates from the fact that just a year or two ago, borrowers did not have to provide income documentation and today income must be documented with tax returns, paystubs and W-2s.

Myth #4) I am going to wait because house prices are still going down. While that may be the case in some parts of Santa Cruz County, those who watch the real estate market here are saying that we may have hit the bottom and home prices are now edging up. One thing is for certain, all things economic are cyclical. We can count on real estate prices and mortgage rates to cycle up and down over time. Whether real estate values have hit the bottom here or not, they are sure to be going up, along with mortgage rates, within the near future. Smart homebuyers will get in now while mortgage rates and home values are still relatively low.

Myth #5) I am going to wait until I can save more money. It is extremely difficult to save enough money to keep up with rising mortgage rates and increasing home values. To top it off, first time homebuyers who buy a home this year may be eligible for an $8,000 tax credit from the federal government. Combine the tax credit with an FHA loan that requires only a 3.5 percent down payment, and the barrier to entry into homeownership is obtainable for many who do not even realize it.

Anyone who has ever considered buying a home should make an appointment to consult with an experienced mortgage professional to explore options in today’s lending environment. Even if buying a home may be a year out, it is not too early to find out what your financing options are.

This column is written every Saturday by Peter Boutell, Certified Mortgage Planner and a principal at Santa Cruz Home Finance. You may reach him at (831) 425-1250 of email him at Peter@SantaCruzHomeFinance.com.