5 Mortgage Myths Your Borrowers Need To Be Informed About
Buying a home doesn’t have to be a miserable experience. A lot of misinformation about getting a loan is constantly circulating, and it can lead to anxiety and sometimes even derail the process.
Myth #1: Your down payment needs to be at least 20%
This might have been the case several years ago, but now your down payment can depend on many other factors. Your financial health — like your credit history, income, and debt — plays a significant part in determining what monthly payments and interest rates you will receive. You can apply for down payment assistance or take advantage of mortgage insurance to increase your buying power.
Myth #2: You need to have excellent credit
A good credit score is always helpful when trying to attain a home loan, but having excellent credit isn’t required. It is still possible even with an average score.
Certain lenders may be willing to work with you and your situation. You can qualify for certain government loans with an average score and put only 10 percent down. Anything above 620 means you can apply for a conventional loan and you won’t need any government assistance.
Myth #3: You need to have all your debt paid off before applying
The home market has gone through dramatic changes. Only 20% of Millennials (age 25-40), who you would think would be dominating the housing market, own a home. One of the main reasons this number is so low is student loan debt, which is substantially higher than in the previous generation.
But having some debt doesn’t need to be a show-stopper. As long as you work to increase your score as much as you can, improve your debt-to-income ratio and take advantage of assistance programs, it is still possible to get approved.
Myth #4: You do not “need” a home inspection
Ok, so this one is half true. Home inspections are optional, but they are still a good idea. Letting a professional evaluate your home will let you know about existing problems as well as those that will surface down the road. Inspections are also a safety measure and there to protect the buyers. Certain toxins such as mold and carbon dioxide could be detected and rooted out. An inspection ranges anywhere from $250-$400 and it is well worth it for the money you save doing needless repairs. Work with your sellers and see if negotiations can be made.
Myth #5: Being pre-qualified for a loan is the same as being pre-approved
Many first-time buyers mistakenly think that just because they are pre-qualified, they are also pre-approved. This is not always the case and can be very disappointing.
To receive a pre-qualification, a borrower provides information regarding their income, employment, and debts to a lender, which is then used to determine the potential borrower’s likelihood of getting a mortgage. This information is not verified until the borrower applies for the mortgage. Often, problems arise at the time of the application process, especially if some of the information is incorrect.
The lender will need to verify their credit, employment income, and other financial information to get pre-approved. Once they have, they will receive pre-approve status and be better positioned to obtain the loan.
FSB Mortgage is a nationwide, bank-backed lender offering a broad range of loan products to retail customers. Get in touch today to learn about our flexible lending products, fast turn times, and exceptional customer support.