Myths And Facts about Mortgage

For many, buying a home through mortgage can be just as exciting as it is scary. We’ve all heard the rumors and stories about what you should or shouldn’t do when it comes to buying a home with mortgage. But don’t let these mortgage myths intimidate you. In fact, some of the most common myths have been debunked here

Myth #1: I can’t afford to buy a home.

Truth: If you can afford to pay monthly rent, you may be able to afford to make a monthly mortgage payment. To find out how much mortgage you can afford, talk to a qualified mortgage lender. You can get a quick, non-binding estimate, or a prequalification, just to get an idea of how much money you could potentially borrow.

Myth #2: You must put 20% down to buy a home.

Truth: Having a 20% down payment is ideal, but plenty of people don’t have that much money to put down. The good news is that there are many programs available for borrowers who can’t afford a large down payment.

Myth #3: You need excellent credit to be approved for a mortgage.

Truth: Your credit score doesn’t have to be flawless to find a mortgage that fits your budget. Credit history is certainly one of the factors that determines whether a borrower is approved for a loan and also impacts the interest rate a borrower is offered. There are many mortgage programs available to borrowers with lower credit scores. So if you have less than perfect credit, don’t give up on the idea of getting a mortgage.

Myth #4: Renting is cheaper than buying a home.

Truth: You may think you can’t afford a home, but what about all that money you’re spending on rent? When you pay your mortgage, the money is going back into the equity of your home. That means you’re getting a real return on your investment as the years go by.

Also, with a fixed-rate mortgage, your monthly principal and interest payments will be the same for the life of your loan. With rent prices having the potential to rise every year, in the long run, it may be cheaper to have a mortgage.

Myth #5: The lowest interest rate is the best option.

Truth: When you’re shopping for a home loan, a low interest rate is important — but it’s not the only thing to consider.

Your interest rate is the cost you’ll pay to borrow money. The interest rate is simply the percentage you’ll be charged for borrowing the money. It doesn’t include any other fees you might be required to pay the lender for the loan — think origination fees, closing fees, documentation fees, and other finance charges.

On the other hand, the APR, or annual percentage rate, gives you a more comprehensive look at how much you’ll pay when you borrow money for a loan. Basically, it’s the total cost of borrowing money expressed in terms of a rate. So consider the APR to be a good preliminary comparison tool.

Remember

Ask an experienced mortgage loan officer about anything you don’t understand; they’ll be able to separate mortgage facts from fiction.