You’ve heard it for a long time now – it’s an excellent time to buy a home! Interest rates are low and there are wonderful homes in the area to choose from. However, you may be hesitant due to some common myths surrounding buying your first home. The mortgage process can be especially intimidating to the first time homebuyer seeing it involves several steps and decisions. You may face certain myths and misconceptions when moving from the prequalification stage to closing. The key step to buying a home is successfully finding financing, which is usually done by getting a mortgage.
Home buyers who know the process find the mortgage process quite easy. Apart from understanding the ins and outs of the mortgage process, it’s vital to know the myths. There are many common mortgage myths that most people believe and getting confused by them can make the process of getting a mortgage a calamity. After knowing these myths, you may be better prepared to buy a home.
Common Mortgage Myths
Let’s discuss some of the mortgage myths that you should know when buying a home.
Myth #1: You will get the loan if you prequalify for a mortgage.
The mortgage prequalification process just provides you with an idea of how much you qualify to borrow based on your credit and your debt-to-income ratio. It is not a binding agreement, and the lender may demand additional documentation from you before issuing the loan. Even when they say that you are prequalified for a mortgage, you may still be forced to provide more information before you are fully approved.
Myth #2: You should have a very high credit score.
If you have some issues with your credit history, but make a steady income and pay your bills on time, you may still be able to qualify for a mortgage. On the other hand, you may get pushed to a larger down payment or meet other qualifications, but you don’t need to have a perfect credit score to qualify.
Myth #3: Renting is better than buying a home.
If you are moving frequently, staying on a rent basis may be the best option for you. If you are looking to stay in your home for a longer period, you will save money over time. One advantage with home ownership is that you don’t need to worry about sudden rent increases. Your monthly payment with a fixed-rate mortgage will not change unlike inflation.
Myth #4: All banks offer the same home-financing options.
No, there are considerable differences in products, rates, and associated fees for closing the loan. Some mortgage advisors don’t look for a commission. They would like to offer choices that suit your financial situation. Some also offer lower closing costs than their competitors, which helps you save money.
Myth #5: You will get the full amount you prequalified for.
Getting prequalified will only let you know what you can afford, but it isn’t the final approval from the bank for your loan. Some excited first time home buyers will buy furniture and other costly facilities for their home thinking they are guaranteed the loan. Lenders will look closely at your credit before closing your home to verify no huge changes have happened to you to repay your mortgage. It’s best not to over spend during this time.
Myth #6: How much you can borrow depends on your income.
The amount of income you make is crucial, but it’s not the only aspect that decides how much you can really borrow. For example, if a buyer makes a hundred thousand dollars a year, but has thousands of dollars in loan debt, it will affect the maximum price of a home they can buy. Debts impact how much you can borrow to purchase a home, particularly in this generation. Other factors like credit scores and down payment percentage play a role too, but income is only one factor when it comes to deciding how much you can borrow.
Myth #7: A 30 year mortgage is always best!
Many home buyers opt for a 30 year mortgage, but are really missing out on a better mortgage offer. Of course, the monthly payment is higher on a 15 year mortgage compared to a 30 year mortgage, and the amount of total interest paid is quite low. A 30 year mortgage suites those who don’t have money for down payment.
Myth #8: FHA home loans will be offered only to borrowers with no money and poor credit.
Many people believe that FHA home loans will be offered only to borrowers with no money and poor credit. This is a huge mortgage myth. FHA home loans are suitable for borrowers who don’t have enough for a down payment and lower credit, but that doesn’t mean that they are only the people that qualify. The FHA home loan interest rates would be low for borrowers. This is why a borrower with good credit and money available could leverage an FHA loan.
Myth #9: You’ll never get a mortgage if you’ve been denied once.
Many buyers believe that once they are denied a mortgage, they’ll never get a mortgage. This discourages buyers from approaching a lender in the future. Don’t worry if you are denied when applying for a mortgage. Just follow the proper directions to get a mortgage in the future! Ensure that you pay off your debts, pay bills on time, and improve your credit scores for securing a mortgage.
Myth #10: You’ll Never Get a Mortgage Post Bankruptcy
One major mortgage myth is that after a bankruptcy, you will never get a mortgage again. If you have faced bankruptcy, you need to wait a few years to be able to secure mortgage financing.
Drew Mortgage Associates is one of the emerging leaders in mortgage services in Boston, Massachusetts. Drew Mortgage Associates help qualified borrowers with the best rates and programs for their financial situation. Drew Mortgage Associates also offer an FHA Streamline home loan program for homeowners with existing FHA Mortgages.
Mortgage companies in Peabody, MA know what’s best for the customers who are looking to buy a home or refinance their current home. Drew Mortgage in Peabody offers a variety of options for your loan needs and can help you find the right option for you.
