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For many, buying a home can be just as exciting as it is scary. We’ve all heard the rumors and stories about what you should or shouldn’t do when it comes to buying a home. But don’t let these mortgage myths intimidate you. In fact, we’ve debunked five of the most common ones for you below.
After reading this, you may realize you're better prepared to buy a home than you thought.
Truth: If you can afford to pay monthly rent, you may be able to afford to make a monthly mortgage payment. To find out how much mortgage you can afford, talk to a qualified mortgage lender. You can get a quick, non-binding estimate, or a prequalification, just to get an idea of how much money you could potentially borrow.
Some lenders may offer a mortgage pre-approval. Unlike prequalification, pre-approval means you’ve supplied proof of your debt, income, and savings. Once you’re prequalified or pre-approved, you'll know how much you may be able to borrow.
Truth: Having a 20% down payment is ideal, but plenty of people don’t have that much money to put down. The good news is that there are many programs available for borrowers who can’t afford a large down payment. For example, with a government-backed FHA loan, qualified borrowers can put as little as 3.5% down on their home. Additionally, VA loans are available to qualified service members and veterans with no money down.
If you put down less than 20%, you may have to pay for private mortgage insurance (PMI). PMI is added to your monthly mortgage payment to cover the extra risk the lender is taking.
Truth: Your credit score doesn’t have to be flawless to find a mortgage that fits your budget. Credit history is certainly one of the factors that determines whether a borrower is approved for a loan and also impacts the interest rate a borrower is offered, but an 800+ score isn’t necessary. There are many mortgage programs available to borrowers with lower credit scores.
So if you have less than perfect credit, don’t give up on the idea of getting a mortgage.
Truth: You may think you can’t afford a home, but what about all that money you’re spending on rent? When you pay your mortgage, the money is going back into the equity of your home. That means you’re getting a real return on your investment as the years go by.
Also, with a fixed-rate mortgage, your monthly principal and interest payments will be the same for the life of your loan. With rent prices having the potential to rise every year, in the long run, it may be cheaper to have a mortgage.
Pro tip: If you’re a first-time home buyer, you may also be able to take advantage of special programs in your area that help with closing costs and provide down-payment assistance.
Truth: When you’re shopping for a home loan, a low interest rate is important — but it’s not the only thing to consider.
If you’re preparing to buy a home, it’s important to educate yourself to avoid feeling intimidated throughout the process. Ask an experienced mortgage loan officer about anything you don’t understand; they’ll be able to separate mortgage facts from fiction.
Buying a home is a life-changing decision. We can help you develop the right plan to save for a home and find the right mortgage for you. For personalized assistance in preparing for a home purchase, talk with a Citizens One Loan Officer.