Let's Debunk Some Mortgage Myths

Getting a mortgage can be a mystifying process, especially if you've never done it before. To make matters worse, there's a lot of incorrect and outdated information out there to contend with. To that end, we've decided to set the record straight. Ready to debunk some myths?

Myth #1 - GETTING PRE-QUALIFIED IS THE SAME AS GETTING PRE-APPROVED

Though these two terms may sound the same, there is a world of difference between them. You can get pre-qualified in minutes just by answering a few questions about your financial situation. However, the pre-approval process is much more through. In this scenario, your financials are vetted by a lender before a decision is made. If you're approved, you're given a maximum loan amount based on how much the bank is willing to loan you.

These days, a pre-qualification isn't worth much. Sellers, by and large, prefer a pre-approval since that's a much more accurate representation of your ability to actually buy the home. When getting ready to purchase a home, make sure you get pre-approved and leave the pre-qualification behind.

Myth #2 - YOU NEED PERFECT CREDIT TO BUY A HOUSE

Your credit may not be spotless, but that doesn't mean you can't buy a home. These days, while conventional loans require a score of at least 620, loans backed by the Federal Housing Administration (FHA) only require a score of 580 for approval. Beyond that, there are options like finding a co-signer or agreeing to make a bigger down payment that can help reassure your lender.

That said, the interest rate that you'll pay on the loan is also determined by your score. Therefore, you'll end up saving in the long run if you make sure your credit is in the best possible shape before you buy. You can raise your score by making sure to make your payments on time every month and paying as far above the minimum payment as possible.

Myth #3 - YOU NEED TO PUT 20% DOWN

There was a time when putting 20% down was the gold standard when buying a home. However, those days have come and gone. In today's market, most loans require less than 6% down. In fact, most FHA loans only require as little as 3.5% down and, if you qualify, loan programs through the Veterans Administration (VA) often don't require any money down at all.

Beyond that, there are many down payment assistance programs and grants that can help you come up with the cash, especially if you are a first-time homebuyer. You'll need to talk to your lender to see what programs are available in your area, but help is out there.

Myth #4 - THE DOWN PAYMENT IS YOUR ONLY UPFRONT COST

While the down payment is a huge upfront expense to buying a home, it isn't the only one that you need to take into account. There are also closing costs to consider. These fees account for all the charges necessary to facilitate the transaction. They usually add up to 1% - 2% of the sale price.

Plus, if this is your first home, there will be a lot of expenses for investing in household items and gadgets if you haven’t already. I mean, the grass isn’t going to cut itself!

As you’re preparing to get a mortgage to buy a home, it’s vital that you don’t fall for any of the above mortgage myths.  If you happen to hear something relating to mortgages that seems a little crazy, or if you need a list of great lenders, give us a call. We will be able to help you get pre-approved and well on your way to finding your home.