Mortgage Myths Debunked That Aren’t True

There are many mortgage myths out there, ranging from how difficult it is to get a loan to how much to put down. It's important to understand the facts and how they relate to you. You could lose your home and all the benefits that you would enjoy by not doing so.

What You Could Gain

Renting is a good option, but buying a home might be a better financial choice. This depends on many factors, such as where you live, current interest rates, and how much rent you pay. If your home increases in value, equity will also accrue. This is money that you will be able to use when the time comes to sell your home.

Apart from the financial benefits, owning your home allows you to stay put. This may allow you to commute less or let your children grow up in the same area and attend the same schools.

It May Be Easier Than You Think To Take The Jump

Contrary to what you might have heard, a mortgage doesn't require excellent credit or a large downpayment. However, it's important to have your finances in order before going house hunting and talking to lenders.

Don't let the facts fool you. Once you understand the facts about mortgage products and processes, you may be eligible for one of the many mortgage options, downpayment assistance, or affordability programs. These are some common myths that we have dispelled to help you get started.

Debunked Myth #1: First, Find A Home And Then Think About Financing

Many first-time buyers learn this painful lesson when they fall in love with a house only to find out that they aren't eligible. Therefore, it is important to speak with a lender before embarking on your home-buying adventure.

To preapprove your loan, a lender will ask you a few questions about your credit. This will help you to understand your budget and any credit issues you might have to get a lower interest rate. This could potentially save you thousands of dollars over the life of your loan.

Debunked Myth #2: Perfect Credit Is A Must

Very few people have perfect credit. That's what lenders don't want anyway. A mortgage may be possible if you have a stable income and pay your bills on time. The type of loan you choose will determine the minimum credit score required. Conventional loans require a minimum credit score of 620. FHA loans can allow for credit scores as low as 500 in certain cases. Remember that lenders might have other requirements, such as income or down payment amounts.

Debunked Myth #3: 20% Down Is Required

Although this is what most homebuyers hear from their parents and friends, it's not true. Only 25% of homebuyers pay 20% upfront for a down payment. Qualified borrowers can get home financing through many programs with lower down payments, such as 3% down for programs backed by Fannie Mae or Freddie Mac and 3.5% down for FHA. In addition, some buyers may be eligible for USDA or VA programs that do not require any down payment.

Debunked Myth #4: Gifts/Grants Are Not Allowed To Be Used For Your Down Payment

Today, many mortgages allow down payments to be made from any source provided that the sources are documented. 

You can include gifts from family and friends in your down payment, but grants from non-profits and other sources are also available. These grants could be helpful, such as company-sponsored home buying programs. If you'd like to see what's available, you can search for down payment assistance programs in your area at www.downpaymentresource.com.

Debunked Myth #5 - It Is Always Better To Get A 30-Year Fixed-Rate Mortgage

You are wrong again. While the 30-year fixed mortgage is a popular choice, there are other mortgage options. A 30-year fixed-rate mortgage may be more suitable for you. This might offer a quick-term solution and a super low rate if you are only planning to stay in the area for a few years.

Each situation is different, so speak with multiple lenders to find the best loan option for you. This will take into consideration your financial ability, the length of the house, and other factors.

Debunked Myth #6 - You Have To Use The Lender Who Pre-Approved

Although getting preapproved by your lender is a first step to getting a new home loan, this does not mean that you have to continue working with them once you are ready to buy. It's a good idea to compare terms from different lenders and shop around. There are many mortgage options available that can lower your interest rate and potentially save you thousands of dollars over the life of the loan.