Mortgage Myths Busted
Purchasing your home is one of the largest and most expensive investments you will ever make. To make things a little scarier, there is a lot of incorrect and outdated information out there when it comes to home mortgages. Don’t let these mortgage myths intimidate you. We’ve debunked ten of the most common one’s for you!
Mortgage Myth #1: You MUST put down 20% to purchase a home.
Truth: There are loan programs that you can put down as little as 3%! If you are a Veteran or have VA benefits, you may not be required to put down anything at all. We will help you choose the right loan program to fit your financial needs.
Mortgage Myth #2: You MUST be WITHOUT debt to purchase a home.
Truth: You can qualify to buy a home if you have outstanding debts such as car payments, credit cards, and student loans. How much home you can afford is calculated by how much debt you have relative to your total income. We have financial options such as debt consolidation that can benefit you in the purchase of your dream home, etc.
Mortgage Myth #3: You NEED to have EXCELLENT Credit to buy a home.
Truth: There are alternate ways to purchase a home without a perfect credit score, such as adding an additional borrower or making a bigger down payment.
Mortgage Myth #4: You CAN'T buy a home after filing for bankruptcy or after undergoing a short sale or foreclosure.
Truth: The truth is that people that have gone through these situations in the past can purchase, however, patience is key. You will have to go through a waiting period depending on your situation and the loan program that you are most interested in. It will be a process, however, we will be with you every step of the way!
Mortgage Myth #5: The down payment is your only upfront cost.
Truth: While the down payment is typically your largest upfront expense when buying a home, it is not the only expense you will have. Closing costs also need to be considered and can add up to about 3-5% of the loan amount. Closing costs normally include charges for title insurance, property taxes, homeowner’s insurance, government taxes, recording fees, escrow costs, appraisal fees, etc.
Mortgage Myth #6: No gifts or grants are allowed for a down payment.
Truth: You are allowed to use gifts and grants to help your down payment for qualifying loan types, and as long as the sources are documented.
Mortgage Myth #7: Getting pre-qualified is the same as getting pre-approved.
Truth: Though these two terms may sound the same, there is a world of difference between them. When you pre-qualify for a home loan, you are getting an estimate on the amount that you would be eligible to borrow based on the information you provide about your finances, as well as a credit check. This amount will give you a general idea of what your price range should be.
A pre-approval takes the pre-qualification one step further and is issued after the lender has reviewed your financial documents and has verified the information you provide. Once pre-approved, you’ll receive a pre-approval letter, which is an offer but not a commitment, to lend you a specific amount. A pre-approval lets the seller know that your offer is more solid because the lender has actually reviewed all of your documentation and is not just going off of a conversation.
Mortgage Myth #8: Find a home first, and then worry about financing.
Truth: This is a very painful lesson for many first-time buyers who fall in love with a home only to learn that they cannot qualify. That’s why it’s important to consult with a lender before you embark on your home-buying journey.
A lender will ask a few questions about your finances and will check your credit to get you pre-approved. This process will give you a good idea of your price range, and of any credit hurdles you may need to overcome to secure a lower interest rate; potentially saving thousands over the life of your loan.
Mortgage Myth #9: The mortgage process is fraught with obstacles and an excessive amount of paperwork.
Truth: Getting a mortgage is now simple because we have lenders waiting to help you out every step of the way. Much of the process is digital and all required documents are submitted literally in the palm of your hand via your Smartphone. All of the helpful tech such as e-fax, mortgage apps, and website features, allow for a simplified mortgage process.
Mortgage Myth #10: Millennials are not buying homes and all live with their parents.
Truth: The Millennial homeownership rate has climbed 47.9% from 40% just three years ago according to the report from Apartment List’s Homeownership report; accelerating a five-year trend in millennial homeownership rates rising as the fastest.