There are common misconceptions about the home loan process and we're here to bust those myths and put them to rest. As mortgage experts, we’ve heard every myth and misconception under the sun when it comes to home financing. Unfortunately, many of these myths can prevent people from making informed decisions about their mortgages, which can have long-term financial consequences. In this article, we'll dive into some of the most common mortgage myths and debunk them once and for all.
Myth #1: You can't afford to buy a home.
The truth is, if you can afford rent, you can very likely afford a monthly mortgage payment. In fact, rent can sometimes be just as high or higher than a mortgage payment. Plus, by renting, you could miss out on the opportunity to build wealth with one of the most common investment tools for Americans. Owning a home can also help offset your annual tax bill. Consult your tax advisor for details.
Myth #2: You must put 20% down.
Wrong! This is perhaps the most pervasive mortgage myth. We have programs designed to minimize your out-of-pocket costs. This includes programs that may cover the entire down payment if required. While it's true that a 20% down payment can help you avoid private mortgage insurance (PMI), it's by no means a requirement. Many lenders offer low down payment options, such as FHA loans, that require as little as 3.5% down. There are also programs for veterans and first-time homebuyers that offer even lower down payments. Contact your Gateway loan officer to learn more about your options and see if you qualify!
Myth #3: Your credit score must be perfect to qualify.
You're not automatically disqualified from obtaining a mortgage if you have a lower credit score. We look at many factors when considering a loan application including your income, savings, assets, and any outstanding debt. However, taking steps to improve your credit score can help you obtain a lower interest rate. And, while it's true that a good credit score can help you get a better interest rate and loan terms, it's not the only factor lenders consider. You may still be able to get a mortgage with bad credit, although you may need to pay a higher interest rate or put down a larger down payment. It's always worth talking to a lender to see what your options are.
Myth #4: Renting is cheaper than buying.
At first glance, it might appear that way. The benefit of owning a home is that you're investing in your home's equity. And with inflation rising, your rent could end up higher than you expected. Reach out to your Gateway loan officer to learn more about the benefits of having a fixed monthly mortgage payment and the benefits of homeownership!
Myth #5: You should always go with the lowest interest rate.
While a low-interest rate is certainly important, it's not the only factor to consider when choosing a mortgage. You should also look at the loan term, closing costs, and other fees associated with the loan. Additionally, some lenders may offer lower interest rates but require you to pay points upfront, which can add to your closing costs. Points are essentially a form of prepaid interest you can choose to pay upfront in exchange for a lower interest rate and monthly payment.
In conclusion, there are many mortgage myths out there that can prevent people from making informed decisions about their home financing. By understanding the truth behind these myths, you can make the best decision for your financial situation and goals. Always talk to a trusted lender or financial advisor before making any major decisions about your mortgage.
We're ready to find a solution for you. Our Gateway Loan Officers can help you determine how much mortgage you can afford and ultimately how much you could potentially borrow.
