Buying a home can be a confusing process, especially if you’re getting trapped into common mortgage myths. Here are the top 5 mortgage myths to watch out for when stating the home buying process.
Getting Pre-Approved Guarantees That You’ll Get A Home Loan
This is one of the most common mortgage myths and can lead to disappointment if you put all of your time and belief info thinking you’ll get approved for a home loan if you’ve been pre-approved. Going through the pre-approval process gives you a range of home loan amount so you know the ball park of your loan allowance IF approved for a loan. It’s important that once you’re pre-approved for a mortgage, you don’t make any rash decisions. Some of the most common reasons why a mortgage is denied includes changing jobs, adding additional debts, and not having enough money to cover closing costs.
A 20% Down Payment is Required to Get a Mortgage
Don’t let this be the reason you are not buying a home. Yes, with a conventional loan, it is necessary to put down 20%, but with an FHA loan you’re able to put down as little as 3.5% down. It is important to note that when paying a low down payment, you will likely need to pay mortgage insurance every month on top of your mortgage payment. It’s recommended that you talk with a mortgage lender to weigh the pros and cons of buying a home with a small down payment. This helps home buyers who have little money saved up.
A Perfect Credit Score is Needed to Get a Mortgage
Credit is a very important factor when it comes to applying for a loan, but you don’t have to have a perfect score. In fact, there are many mortgage products that exist that are tailored to help potential borrowers with 600-650 scores. Obviously the higher your credit score the better the chances of getting approved, but don’t give up on the thought of buying a home just because you have a lower than perfect credit score. There are programs out there for people just like you!
It’s Always Better to Get a 30 Year Mortgage
While it’s hard to believe a 15-year mortgage product would be better than a 30-year product, the total amount paid is significantly lower since you only paid interest on 15 years. Also, the amount of equity on a 15-year mortgage grows faster than it would with a 30-year mortgage. However, it is better for some borrowers to get a 30-year mortgage, especially if these borrowers don’t have a lot of reserve money available each month. So yes, if you can do a 15-year mortgage and it makes sense for you financially, you will be saving money, but a 30 year mortgage plan also makes the most sense for some borrowers.
If You’re Denied for a Mortgage Once, You’ll Never Be Able to Get a Mortgage
Applying for a mortgage is not a one strike and you’re out process. Tips such as working on credit repair, paying bills on time, and paying off debts can help you work towards the goal of of securing a mortgage in the future. It’s important that you don’t get discouraged after being denied because your lender can help you stay on track to reaching your next goal. Believing this myth can really discourage buyers as they may feel stuck in their renting position for the long term. Don’t fret if this has happened to you, reach out to your lender and get back on the horse of trying to buy a home!
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