Five Common Mortgage Myths
Purchasing a home is likely one of the biggest financial decisions you will make. As you consider homeownership, we're debunking these five common mortgage myths.
Myth #1: Renting is cheaper than buying.
It depends on when and where you buy. Many factors play into your monthly mortgage payment, like interest rate, mortgage/home/flood insurance, property taxes and more. Depending on purchase price, your credit and interest rate, you might have a lower house payment than what you currently pay in rent. Plus, your house payment is helping you earn equity that you may someday get back.
Myth #2: Shopping for a mortgage hurts my credit.
According to FICO, a hard inquiry from a lender could decrease your credit score five points or less. The drop is temporary. Your scores will bounce back up again, usually within a few months, assuming everything else in your credit history remains positive. When you are shopping for a home loan, do not be afraid to shop multiple lenders. You will see a separate inquiry on your credit report from each of these lenders, but your credit score won't be penalized for each one. Most credit scores will count multiple inquiries for mortgage as one if they are made within a 30-day timeframe.
Myth #3: I can only buy a house if I have 20% for a downpayment.
If you meet certain income and credit requirements, you could qualify for a federal government loan program that requires zero or as little as three percent down. Some state government housing programs offer qualified buyers downpayment and closing cost assistance. County and community entities may also provide assistance if you purchase in a particular area or have a specific occupation. To know if you qualify for any of theses, work with an approved, local lender. Local lenders have access to these programs and potentially more.
Myth #4: I only need to save up for a down payment.
When you go to close your loan, you will have to pay at least two to six percent of the purchase price in closing costs. These funds cover bank and processing fees, title insurance, appraisals and more. Some homeowners negotiate closing costs when they make an offer, but it's not always a guarantee. Some sellers may refuse or counteroffer only to pay a portion of them. Your lender can usually estimate the amount, so you will know roughly how much you will need to bring to closing.
Myth #5: The price of the house is the most important thing to consider.
Be sure the home you buy meets your needs, not just your budget. A house is likely the most significant purchase you will make, and it's a multi-year commitment. Be sure you like the neighborhood and the room layout. If you have kids, consider the proximity to schools, parks and shopping. How does it affect your commute? You may only get everything you want if you build your home (and maybe not even then). Decide what you are willing to compromise and what you are not (number of rooms, part of town, etc).
Disclosure:
For informational purposes only.