The thought of starting the homebuying process can be intimidating. There are questions to answer, factors to consider, plans to make, and steps to take. While there are plenty of tools and resources available to help you along the way, there are also myths and misconceptions that could make you second-guess your goal of purchasing a home.
Don’t let these mortgage myths scare you! Below, we’ll take a look at some of the common mortgage myths and learn why these shouldn’t keep you from starting the homebuying process.
Myth 1: A Down Payment Must Be 20%
Many people believe that a minimum down payment for a house is 20%. We know that saving that percentage on a house is a huge goal. It can be intimidating to hear that number and believe that reaching that savings amount is unachievable. But don’t let this scare you.
Contrary to that belief, a 20% down payment isn’t a mandatory requirement. This misconception likely comes from the fact that putting 20% down can help borrowers avoid paying for private mortgage insurance (PMI), leading many to assume that it’s required. But in reality, there are other programs and loan options available to potential homebuyers that allow for lower down payments.
Some of those options include FHA (Federal Housing Administration) and VA (Department of Veterans Affairs) loans. Depending on the loan type and downpayment, borrowers may have additional mortgage insurance costs to consider.
So, don’t let a lesser down payment be the reason you don’t start working towards your goal of homeownership.
Myth 2: You Must Have a Perfect Credit Score
Having a strong credit score can help when you’re applying for a mortgage, but you don’t need a perfect credit score to start the homebuying process.
While a higher credit score can help you qualify for certain loan options and potentially better rates, having a modest credit score doesn’t have to stop you from purchasing a home. Credit history and credit score are factors lenders consider. But they also evaluate your overall financial profile, including factors such as your income, employment, and debt-to-income ratio.
Even if you don’t have the perfect credit score, don’t let that scare you away from starting the homebuying journey.
Myth 3: Getting Prequalified Means You Have to Buy
After planning, saving, and working towards your homebuying goal, getting prequalified or preapproved can be a helpful next step. But hearing these terms may make some potential buyers think they’re committing to purchasing a home or taking out a mortgage. That’s not the case.
Getting prequalified or preapproved can help you understand how much you may be able to borrow and give you a better idea of what may fit your budget. Depending on the type of mortgage and lender, the process may also help demonstrate to sellers that you’re prepared to move forward with a home purchase.
While prequalification or preapproval is an important step in the homebuying journey, it doesn’t mean you have to commit to a mortgage or purchase a home. It helps you understand your borrowing potential, so you can shop for a home with greater confidence and a clearer budget in mind.
Buying a home can feel intimidating, but myths and misconceptions shouldn’t stand in the way of your goals. Understanding down payments, your credit score, and the prequalification or preapproval process can help you approach the homebuying process with confidence.
If you believe that you’re ready to take the next step in your homebuying journey, our mortgage team is here to help and answer any questions you may have! You can contact us today and meet the mortgage team by clicking the button below.
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