Mortgage Misconceptions: 3 Mortgage Myths Debunked
You may have found that everyone seems to have a tidbit of sage wisdom to share when they learn that you're looking for a mortgage, but not all "conventional wisdom" may be up to speed with the times. It's important to have good information. This is a big decision, and not knowing all your options could greatly impact both your buying power and financing for your new home.
Since mortgages are influenced by financial conditions which change often, what once was mortgage wisdom are now myths that seem to have long outlived their usefulness.
Credit Rating Misconception: "You can’t overcome bad credit.”
Fact: Your credit score can change from month to month. One late payment can suddenly set you back, but if you get on track and make the rest on time, you can improve your credit. Set good spending habits and don’t get discouraged, even a bankruptcy won’t prevent you from buying a home in the future.
Mortgage Cost Misconception: "Lenders will ‘nickel and dime’ you with fees."
Fact: A reputable lender should be up front about the fees that are charged, and though the lender is the one to give you the bill, many fees cover third-party costs, like the appraisal, inspection, and credit review. Your loan estimate will break all this down for you, and if anything was overcharged upfront, it will be credited back to you on the settlement sheet.
Housing Affordability Misconception: "You need 20% down payment in cash to purchase a home.”
Fact: Several loan programs only require 0% - 3.5% down. Most government loans, such as Federal Housing Administration (FHA), Department of Veteran’s Affairs (VA) and the US Dept. of Agriculture (USDA), as well as state sponsored bond programs are a few of the options.
It can all seem overwhelming, but it doesn't have to be. Through the years there have been plenty of changes to the offerings and laws surrounding the mortgage industry so an experience that your friend had years back may not apply to what it's like to get a mortgage today. Start a no-obligation application to see what loan program works best for your financial situation.