Many people find buying a house as exciting as it is scary. We’ve all heard stories about what to do when buying a house. Don’t let mortgage myths scare you. We’ve debunked five of the most common ones for you below.
You may find that you’re better prepared to buy a home than you thought.
Myth #1: You Need To Save 20% To Buy A House.
Fact: A 20% down payment is ideal, but most people don’t have that much money to put down. There are many programs for borrowers who can’t afford a large down payment. For instance, people who are eligible for a government-backed FHA loan can put as little as 3.5% down on their home. VA loans are available to service members and veterans who have no money down.
If you put down less than 20%, you may have to pay private mortgage insurance. PMI is added to your mortgage payment to cover the extra risk the lender takes.
Myth #2: I Can’t Afford To Buy A Home.
Fact: If you can afford to pay monthly rent, you may be able to pay monthly mortgage payments. Talk to a qualified mortgage lender to find out how much mortgage you can afford. You can get an estimate or prequalification to see how much money you could borrow.
Some lenders will give you a mortgage pre-approval. Pre-approval means that you have provided proof of your debt, income, and savings. Once you’re pre qualified or approved, you’ll know how much you can borrow.
Myth #3: The Lowest Rate Is The Best Option.
Fact: When you’re looking for a home loan, a low interest rate is important, but it’s not the only thing to think about.
You pay interest when you borrow money. The interest rate is the amount you’ll pay to borrow the money. It doesn’t include any other fees you might have to pay the lender for the loan.
The APR, or annual percentage rate, tells you how much you’ll pay when you take out a loan. A rate is the total cost of borrowing money. An APR includes the cost of interest plus any additional lender fees, such as closing fees, origination fees, or other finance charges. The APR is a good starting point for comparing loan terms and fees.
Myth #4: You Have To Have Excellent Credit To Get A Mortgage.
Fact: You don’t have to have a perfect credit score to get a mortgage that fits your budget. A borrower’s credit history is important in deciding if they can get a loan. It also affects the interest rate they pay, but not everyone needs an 800 or higher score. There are many mortgage programs that can help borrowers with lower credit scores.
Even if you don’t have perfect credit, you can still get a mortgage.
Myth #5: Renting Is Cheaper Than Buying.
Fact: You might think you can’t afford a home, but how much money are you spending on rent? When you pay your mortgage, the money goes back into your home’s equity. This means you are getting a real return on your investment over time.
A fixed-rate mortgage will have the same monthly payments for the life of the loan. With rent prices going up every year, it may be cheaper to have a mortgage in the long run.
The Bottom Line
If you’re buying a home, it’s important to know what to do to avoid feeling overwhelmed. Ask an expert mortgage loan officer if you don’t understand something. They can tell the difference between real and false information about mortgages.
A home is a big decision. We can help you plan for a house and find the right loan for you. Talk to us for help with your home purchase.