Correcting Mortgage Myths for the Homebuyer
One of the hardest things about being a first-time (or returning) homebuyer is navigating the world of qualifying for a home loan. To make matters worse, there are quite a few rumors and received truths about mortgages and how to obtain one that are floating around in the popular consciousness.
But disinformation is your enemy. So here we go, busting the top seven mortgage myths to demystify the mortgage qualification process and to help you understand exactly what you’re signing up for.
1 – Shopping for a Great Home Loan Will Ruin Your Credit
Wrong! Not all credit inquiries are created equal. Applying for multiple credit cards will hurt your score, but having multiple lenders check your credit shouldn’t drive your score down.
2 – You Can’t Get a Loan Without Perfect, or at Least Good Credit
Wrong! You can qualify for a home loan with very poor credit. There are mortgage products specifically designed to help people with less than perfect and even poor credit rebuild their financial lives around owning their own home. Having poor credit will cost you a bit when it comes to the interest rate you can get, however. That’s why it’s generally a good idea to get your credit as healthy as possible before you start the mortgage shopping process.
3 – You Need at Least a 20% Downpayment
Wrong! Twenty percent is the standard, but there are several programs, including those backed by the government and some non-profit agencies, that get qualified buyers into homes with as little as 0% down. Check with your mortgage broker about what might be available for you. But remember, the greater your down payment, the lower your monthly payment.
4 – Thirty-Year Fixed Mortgages Are the Best
Wrong! Thirty-year mortgages are the standard, but there are many other products available to most buyers. Chat with your mortgage expert about what you can qualify for and what might be best for your financial situation.
5 – Prequalifying for a Loan Is the Same Getting Preapproved
Wrong! Seriously wrong. These days prequalifying doesn’t mean much to most lenders and real estate brokers. Getting preapproved on the other hand can help you land exactly the home you want.
6 – Paying Off Your Mortgage as Soon as Possible Is the Best Policy and Homeownership Is a Solid Path to Wealth
Both wrong – at least in many instances. With interest rates still low, it may make better financial sense to invest your extra cash in something other than your home. Also, while real estate is generally a pretty safe investment, it is far from foolproof. Talk to a financial counselor about what’s best for your situation.
7 – Refinancing Is Over Now That Interest Rates Are Rising
Wrong! As long as you’re currently paying more in interest (by at least a point) than the current rate, it may make sense to refinance your home. Talk to your mortgage professional about what refinancing can do for you.
Getting a Great Home Loan Is Easy
True! For most people, getting a great home loan is as simple as getting your credit score as high as possible and talking to a mortgage professional. There are many products out there and there is likely one that is just right for you.
