Are you entering the mortgage process? Tired of hearing conflicting information and advice? We help cut through the noise right here.
Cutting Through The Confusion About Mortgages
When you start your mortgage journey, one of the first things you might notice is that there is a lot of information to absorb. It can be confusing and overwhelming, from unfamiliar terms to advice from everyone you know — and even people you don’t.
We help you navigate the mortgage process by clearing up some of the industry’s most common myths below.
Myth #1: I Can’t Afford to Buy a Home
Truth: If you’re currently paying the rent with no trouble, odds are, you can afford a monthly mortgage payment on a home!
Fortunately, you can work with a qualified mortgage professional to see how large of a mortgage payment you can afford. You can also use the Affordability Calculator from Better Rate Mortgage to quickly assess what homes you could buy! Many lenders even offer a mortgage pre-approval, so you know exactly how much you’ll be able to borrow.
Myth #2: You HAVE to put 20% Down
Truth: Though many people think you need to have a 20% down payment to buy a home, the truth is that you can buy a home with as little as three or even 0% down.
While putting a larger downpayment on the table may be a good idea, many people can’t put down such a large sum—fortunately, many programs like government-backed FHA loans and VA loans for qualified veterans and service members.
Myth #3: Perfect Credit is Non-Negotiable
Truth: While your credit history does play a role in being approved for a loan, perfect credit is not required!
Life happens. Sometimes it affects your credit. Don’t hold back on your dream of home ownership over bruised credit! These days, there are several mortgage programs available to borrowers with less-than-perfect credit.
Myth #4: Renting is Cheaper Than a Mortgage
Truth: In most cases, this is actually false!
Except for rare situations, buying a home can save you more money than renting in the long run. There are tax benefits with mortgages and, generally, fixed payments that will not increase yearly. That aside, your monthly payments help build up equity rather than supporting your landlord’s business.
Myth #5: Always Pick the Lowest Interest Rate
Truth: Being mindful of your interest rate is important — but it’s not everything.
Many variable fees can outweigh the savings on your interest rate. From origination and closing fees to documentation fees and other finance charges – it’s essential to look at the whole picture.
Myth #6: A 30-Year Fixed Rate Mortgage is the Best Choice
Truth: Despite more than 75% of borrowers entering into a 30-year fixed rate mortgage, there might be better options!
If you can afford higher payments or may be selling your home relatively soon, there may be better lending solutions for your situation.
Myth #7: You Should Spend the Max You Qualify For
Truth: There’s no need or benefit to overspending.
While you may get approved for $50k, $100k, or even more than your initial budget, consider how comfortable you’ll be with larger payments. You’ll want to think through your potential to save and maintain a solid financial future when considering how much monthly payment you are willing to take on.
Myth #8: Refinancing Isn’t Worth Hassle
Truth: The advantages a refi offers suggest refinancing is definitely worth exploring!
While it may seem like inviting a lot of stress for a little reward, lowering your interest rate by half to even a full percent can equal big savings over the life of your loan! Those refinancing to consolidate debt may realize even more significant benefits.
Myth #9: Pre-Qualified is the Same as Pre Approved
Truth: The two terms sound alike, but they are different.
Pre-qualification: An estimate of how much money you could be approved to borrow for a home loan; you do not have to provide financial proof of income and debt.
Pre-approval: You’re approved for a specific loan amount. In a pre-approval, your credit, employment, and income are verified.
Myth #10: Your Down Payment Covers All Upfront Costs
Truth: Your down payment is probably your largest out-of-pocket expense, but it does not cover everything.
Closing costs vary by transaction by are part of any mortgage. Things like your appraisal, title search, and processing fees are covered by closing costs, which are separate from your down payment.
Myth #11: You Cant Get a Mortgage if You’re Self Employed
Truth: Lenders will consider all borrowers, self-employed included!
Income verification may look a bit different for self-employed borrowers, but the process is still the same at its core. Self-employed borrowers actually have the same access to a wide range of mortgages as traditionally employed borrowers.
Myth #12: Shopping Mortgages Can Hurt Your Credit
Truth: You can inquire with all the leaders you want within a 30-day period!
Shop around! A percentage point can make an enormous difference over the life of a loan. FICO allows borrowers to shop for the best rates by adopting a policy that views all similar inquiries within the same 30-day period as one single inquiry.
Staying Informed for Smarter Borrowing
As you can see – confusion around mortgages is common and can cause unwelcome problems or surprises. You can avoid the frustration of the unexpected by staying up to date on the latest mortgage chatter. Join us in our Facebook group (Facebook group), dedicated to sharing our expert advice to educate borrowers.
Ready to explore your mortgage options? Apply now, or reach out to our team for more information on how to get started!
