Common Mortgage Myths Debunked
Purchasing a home it always a big investment, and learning about the mortgage options is confusing. However, there is a lot of myths and misconceptions associated with the mortgages that can mislead people to get a house. Below are some of the common misconceptions that people have when it comes to mortgage and how to go about purchasing a home?
Another common myth that people believe concerning mortgages is that some have to have a perfect credit score when applying for a mortgage. Although, having a good credit score is beneficial as it can help in getting a good interest rate on the mortgage this is not a mandatory thing to have in order to secure a mortgage. When you apply for a loan, the lenders take a number of factors into consideration among them is the income, the source of income, employment and history, and the level of indebtedness. It’s only when you are aware of the complete scenario of what lenders consider as essential that you need to fill you’re the mortgage application form.
Since the aspect of housing is dynamic and is always subject to change, there are various myths and rumors that surround the mortgage process. The above myths may cause one to be in a state of confusion or even dissuade them from being able to own a home. Below is a breakdown of some of the common myths that you should avoid when it comes to getting a mortgage.
Myth #1: Score a home loan only when you have a credit score of 760 and above.
Let me say at once that folks that think that they have to have a perfect credit score in order to secure a mortgage are not very far from the truth. It is true that credit score is very important when it comes to borrow loans, however, lenders do not solely rely on it when approving mortgages. Regarding your income, your credit-to-income ratio, your employment history and other related factors are also considered by the lenders. You can even get a mortgage if you have a low credit score although the interest rate will be slightly higher.
Myth #2: To purchase a home you must pay a huge down payment.
Another myth that is commonly held is that one needs a lot of money to pay as the down payment for a given home. Of course, a larger initial payment also helps borrowers to get a better interest rate and monthly payments are reduced but this is not obligatory. Indeed there are many no or low down payment loan schemes in the market which include FHA loans and the VA loans. These programs can assist people in becoming homeowners which might not have enough money for a down payment.
Myth #3: It is best to always go for the 30 year fixed rate mortgage.
Although, the most conventional type of loan that is a 30 year fixed rate mortgage has several benefits; it doesn’t mean that this type of loan suits every home buyer. Security mortgage has been divided into different types of products that conform to different eligibility levels. For instance, an ARM is usually cheaper, in terms of the initial interest rate than a fixed-rate mortgage and meaning that it will cost a borrower less to make monthly payments. However, a constant feature of an ARM is the fact that the interest rate can alter with time and therefore attract higher charges on the borrowed amount in the future. One needs to read and understand the big print about the mortgage product they are in and the proportional repayment plan as they select the mortgage product that suits them.
Myth #4: This one among all the mortgage myths is to refinance the mortgage every time there are lower interest rates.
Numerous homeowners get confused about the role of interest rates and think that they should always refinance their mortgage to get a lower monthly payment. That said, despite the fact that refinancing may well cost you less on your monthly payments; not everyone should engage in refinancing. Again, refinancing has closing costs and fees that can erase the gains that you would have made from settling for a low interest rate. Also, if you expect to change your home within the next couple of years, you might not want to take the couple of months’ time required refinancing your mortgage. Nonetheless, to clearly understand whether refinancing is a wise decision, it is crucial to ponder over the pros and cons of the procedure.
Therefore, this paper offers many myths and misconceptions people have with regard to mortgage items. Figuratively speaking, having read this article, you will be able to distinguish myths from reality and make a wiser decision to get a mortgage. Please seek professional advice from a financial planner/ mortgage broker to get advice on your situation and to find the most suitable mortgage product.
Therefore, it is relevant to know different myths in the line of mortgages to avoid compromising the financial status of an individual. Through dispelling of these myths, those intending to buy homes can take the mortgage process head on avoiding these processes. Keep in mind that, one should seek the service of a reputable practitioner and conduct comprehensive research well in order to get the most appropriate mortgage. Don’t make the common laid assumptions get in the way of owning the home that you desire.
