Entering the realm of homeownership is likely to expose you to some of the common mortgage myths. When you tell someone that you are looking to get a mortgage, they may be keen to offer you advice. However, you could find that some of the things they tell you aren't entirely true.
Perhaps the lending standards have changed since they last applied to a lender, or they are telling you something which isn't going to apply to your situation.
These well-meaning mortgage myths could lead you to do the wrong things or worry unnecessarily over issues that aren't true. Let's investigate some of the myths surrounding mortgage loans.
One of the most common mortgage myths you may hear is that you need to find 20 percent as a down payment on your new home. While this used to be the case, it isn't anymore. The down payment needed to buy a home is significantly less.
There are numerous financing programs where you can get a mortgage with low and no down payments. Two of the most popular no down payment mortgages are USDA and VA loans.
There are also conventional low down payment mortgages as well as an FHA loan with a 3.5% down requirement. All of these lending programs are some of the most used by first-time buyers.
Though finding 20 percent means that you don't need the expense of mortgage payment protection insurance, you can get a mortgage with a lower down payment. In fact, only around a quarter of buyers find 20 percent of the purchase price to purchase their home.
As previously mentioned, if you can't come up with 20 percent, there are many other options from organizations like the FHA, the VA, and the USDA. If you meet their requirements, you could benefit from down payments as low as 3 percent or less. There are also offers from traditional lenders that are less than the 20 percent requirement.
Starting to save for a down payment earlier in life will put you in a much better position to become a homeowner sooner. Follow some of the excellent tips for saving your down payment funds at an early age. Speak with a mortgage professional early to ensure you get the financing program that best suits your needs.
Another common mortgage falsehood is that you need an outstanding credit score to buy a home. You don't normally need the best credit score to be approved for a loan. Mortgage lenders don't expect perfection. If you pay your bills and have a consistent income, you have a chance of being approved. Is having a better credit score important? Yes, of course, it is!
If your credit score isn't the best, a loan from the FHA may offer a lifeline. However, lenders have different requirements for approving loans beyond just the credit score. If you can increase your down payment amount, it should improve your chances, for example.
Anyone who is looking to buy a home in the near future should be continuously monitoring their credit score to make sure there are no mistakes. A credit report error can substantially impact the rate and mortgage terms you receive from a lender. You can get your credit report free from each of the three major credit bureaus once a year.
A smart way to do it would be to cut the year into thirds and get a report from each company during that time frame.
Over the last few years, there have been some outstanding companies that have entered the credit enhancement scene. Two that come to mind immediately are Credit Karma and Credit Sesame. Both of these companies offer consumers trust-worthy financial advice to put them in a better position financially in their life but also for specific things like buying a home.
The premise behind these companies is to offer financial tips that are personalized to someone's circumstances. The information you receive can put you on the right track to achieve your goals. Both Credit Karma and Credit Sesame offer unique programs.
You can get a comparison between Credit Karma and Credit Sesame by looking over the informative article at RIS Media. See which company makes the most sense for your circumstances.
You may be told that a fixed-rate 30-year mortgage is the best to go for. It isn't always the best option, though it is certainly one which many people go for. If you think you're not going to want to stay in the area for more than a few years, there could be better short-term options.
Speak to a few different lenders to find out what they offer, so you can get the loan that suits your situation best. Using a mortgage broker is usually the best way to get the financing program that will have the best terms for your unique circumstances.
A thirty-year mortgage being the best option for everyone is a mortgage myth that has circulated for as long as I can remember.
Don't make the mistake of falling for a home that you aren't able to get a mortgage for. Don't start your search before checking how much lenders will be willing to lend to you.
You should go through the process of getting pre-approved for a mortgage. The lender will review your credit history and ask you some questions. This will let you see the price range of homes you should focus your attention on and help you avoid looking at properties that aren't affordable.
It will also show up any issues you have with your credit rating. Fixing problems with your credit could help you receive a lower interest rate on your mortgage, which will make a massive difference to the overall cost of the home.
Never wait until you have found a home you want to make an offer on to get pre-approved. Doing so can significantly hurt your chances of getting a house that others may be interested in as well. Not being in a financial position to make an offer is a big mistake!
Once you are pre-approved with a lender, you don't have to stick with them when you take out the loan. It will give you an understanding of your price range, but you may find other lenders who offer you a better deal on your mortgage.
It is highly advisable to speak to a few different lenders so that you can compare what is available and secure a better deal, which will save you a lot in the long run. Just like any other industry, there are going to be some companies that will offer you a better offer.
A pre-approval should be free. If it is not, go elsewhere.
It is possible to use gifts or grants to give you a more significant down payment on many mortgages. You just need to make sure that the source of the gift is documented.
As well as gifts from friends or family, grants might be available from programs running in your area. It would be prudent to do a bit of research to see if there are any local grants available for first-time buyers.
Hopefully, we have dispelled some of the mortgage myths you may have heard. Buying a home could be easier than you may have expected, and the long term benefits are considerable over renting. Instead of the feeling of wasting your money on rent, you will be paying your money into an asset that should grow in value over time.
If you take control of your finances and make use of any programs available to you, the home of your dreams could be closer than you think. If you have any doubts about anything mortgage-related, make sure you get your questions answered by a professional. There are far too many half-truths floating around that could cause you to make a decision you'll regret.
When buying a home for the first time, make sure you find an excellent mortgage broker and real estate professional to work with. Having the right people in your corner can make all the difference in the world.
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