It’s quite normal to fall prey to myths and untrue information regarding home financing. This is most common when first-time homeowners and purchasers get second-hand information and opinions from individuals who aren’t really related to mortgages and loans.
Such information and myths can negatively impact your financial decisions and leave you at a great disadvantage, which is why it is crucial to have your hands on first-hand information, that too from a reputable Dallas-based mortgage lending company, rather than from unprofessionals.
In this article, we are going to tell you about the 10 most common home mortgage myths, so that you never have to fall for them.
1. “20% is the fixed down payment everywhere”
That is not true. Mostly, you’re going to come across a 20% down payment. If you go for a conventional loan, especially Fannie Mae’s Home Ready mortgage and Freddie Mac’s Home Possible mortgage, then you can expect a down payment of 3%. Moreover, a loan from the Federal Housing Authority (FHA) has down payments of only 3.5%.
There are several other types of government-backed loans that typically let you purchase and finance a house with zero down payment. For instance, USDA loans ( United States Department of Agriculture’s Rural Housing Service) and VA loans (U.S. Department of Veterans Affairs program loans). Therefore, it is crucial to research and ask for down payments before making a final decision.
2. “Only those with the perfect credit score can get a mortgage”
Yes, lenders take a close look at your credit score in order to determine your ability to repay the loan to them. But, if you have a potential borrower with a credit score of 600, you can easily be approved for a mortgage or home loan.
There are numerous mortgages out there that require credit scores between 600 and 650. Therefore, a credit score of over 800 isn’t really necessary to be approved for a loan.
Even if your credit score isn’t quite impressive, there are several Imperfect Credit Programs that help you reestablish or improve your credit score.
3. “Your income level can give you an idea of how much you can borrow”
Yes, your monthly income matters a lot to your lender. But, this is not the only sole factor that lenders take a look at when deciding to grant you a loan or not. For instance, your debt. What is the point of a good income level, when most of it is going to be paid for your debts?
4. “Aim for a 30-year mortgage”
You’re mostly going to be advised to go for a 30-year mortgage, rather than a lesser one, such as a 15-year mortgage.
Although the monthly payment will be comparatively higher for a 15-year mortgage, what most people forget is that the interest rate will be lower too. Also, your home equity will grow faster in the case of a 15-year mortgage.
5. “All mortgage companies charge the same”
This is not true. Each mortgage company and real estate is different from the other. Each mortgage company is going to offer different types of mortgages, different fees, different interest rates, and so on. This is why it is crucial to choose a good and reputable mortgage company.
6. “Only those with no money can go for FHA loans”
Numerous individuals think that FHA loans are for those who can’t afford loans, or have a poor credit history. However, even those individuals who have an impressive credit history and score can take advantage of an FHA mortgage.
7. “You will not be able to receive a mortgage if you have been declined for it once”
If you have been declined a home loan or mortgage, it does not mean you can’t apply for it again or even be provided one later on. You just have to work on improving your credit score, pay off some of your debts, pay off your monthly bills on time, and work towards getting a mortgage. You should never feel disheartened in case you’ve been declined for a mortgage loan.
8. “It is not a good market to buy homes”
Purchasing a home is one of the biggest financial decisions you make in your life. It is more like an investment for your future. Also, there is no perfect time for buying a house. It all depends on your current circumstances and financial ability that makes you ready for purchasing a home.
9. “Purchasing homes is expensive”
Property prices have been increasing each passing time period. This makes individuals think they can’t afford home loans or mortgages. But, there are loans with low-interest rates that have in fact remained steady. This has made purchasing homes much easier, especially for middle-class families.
10. “You need to pay all of your debts in order to qualify for a mortgage”
Having no debts at all isn’t necessary to be qualified for a home loan. Any unsettled debts will not affect your ability to receive a mortgage. You just need to make sure you don’t have an excessive amount of debt, as well as a good credit score. If you already do, then you’re all good to go.