When you are getting ready to buy a home, you need to start looking at mortgages. Almost everyone needs a Mortgage, and unless you have a lot of experience, it can be difficult to understand everything about your mortgage. There are a lot of myths out there, so here are a few you should ignore.
· You Need Perfect Credit
One of the most common falsehoods about getting a home loan is that you need a perfect or near-perfect Credit score. Mortgage lenders take into account more than just credit. You may have no debt or high income that could make up for the lower than average credit. There are many loan products available geared specifically for people in credit repair or who are working on boosting their score. However, if you have a low credit score, you are going to have a higher interest rate. Anything below 500 may disqualify you from some types of loans and even being below 580 makes it difficult, so don’t neglect your credit.
· You Need a Large Down-Payment
Many potential homeowners put off buying a house because they believe they need at least 20% down Payment just to get into the home. This is simply not true. The US government has backed a mortgage program through the Federal Housing Administration (FHA) that will allow a down payment of just 3.5%. The FHA encourages homeownership by working with buyers who may have lower credit scores and allowing for smaller down payments.
However, just because you don’t have to put much down on a house, doesn’t mean you should put the least amount possible. The lower your down payment, the higher your monthly payment will be. If you can afford a 20% down payment, the benefits are definitely worth it.
· Every Mortgage is the Same
There are different types of mortgages, depending on how much you are borrowing and what kind of mortgages your lender offers. If you already have a mortgage on your home and you aren’t looking to move, you can even refinance your mortgage, to allow for a different interest rate or lower monthly payments. It’s important to look at the different kinds of loans that may be offered and use that research to make a decision about what kind of loan you are applying for, so you end up in the best situation possible.
· Pre-Qualified Guarantees a Mortgage
Being pre-qualified for a mortgage only indicates that the mortgage lender has looked at your income and credit report and can give a reasonable estimate of the amount you would qualify for. Once you have been pre-qualified, you may be pre-approved. Pre-approval means the lender has vetted and verified your income, assets, debt, and financial history. While both of these are good indicators of what your mortgage will end up looking like, nothing is final until you have signed the papers.
If you are uncertain about what you have been offered by your lender, don’t be afraid to talk to your real estate agent or get a second opinion. It’s important that you don’t fall prey the myths surrounding your mortgage.