Buying a home is a serious process. It’s a process that involves taking out a mortgage. For first-time homebuyers, the process can be pretty confusing.
Before buying your first home, you must learn about the top mortgage myths and misconceptions. Read on to learn about them.
You Need 20% Down to Purchase a Home
Chances are you heard you need 20% down to buy a home. This isn’t the case. You can take out a conventional loan with as little as 3% down.
So, where did this myth come from? This myth comes from the private mortgage insurance requirement. Mortgage lenders get this to protect themselves from mortgage loan defaults.
You’ll have to pay private mortgage insurance if you take out a loan with less than 20% down. This is why many real estate experts recommend that people wait until they have 20% down to buy a home.
You Must Have Perfect Credit to Qualify for a Mortgage
Credit indeed plays a significant role in one’s ability to get a home loan. You don’t need a perfect credit score to qualify for a mortgage. You may qualify for a mortgage loan even with a low credit score.
Keep in mind that there are different types of mortgage loans. If you have bad credit, it might be a good idea to seek an FHA loan. You may qualify for this loan with a credit score as low as 580 points.
Having Debt or Student Loans Is a Deal-Breaker
This is one of the top mortgage myths that people believe. You might still be able to qualify for a mortgage loan if you have a lot of debt. Your debt-to-income ratio will determine if you can get one.
A 30-Year Fixed-rate Mortgage Is Always the Best Choice
First-time buyers may believe that a 30-year fixed-rate mortgage is the best choice. This isn’t always the case, as other options may be better suited.
A 15-year fixed-rate mortgage can be a better option for those who can afford higher payments. This option allows homeowners to own their home outright in less time. It also gives them the ability to own it for less money.
Refinancing a Mortgage Isn’t Worth the Hassle
Not refinancing a mortgage is one of the biggest mortgage mistakes that you can make. If you get an opportunity to refinance your mortgage, you should try it. You may be able to lower your interest rate.
Be Aware of These Top Mortgage Myths and Misconceptions
These are the top mortgage myths and misconceptions that affect homeowners. Don’t fall for them.