Are you thinking about buying a home? If yes then be prepared to get advice from individuals who last bought a home in the 1980s. Considering what’s just been said, it’s important for you to know that the mortgage landscape has transformed greatly in the past several years. Also, when mortgaging a home, do not believe everything you hear. Instead, do your own research or talk to a credit counselor.
If the mortgage process scares you to death then you need to know that you’re not alone! All aspiring homebuyers go through the same feelings. However, only those who are well informed about the mortgage-buying process prevent their fears from being realized. Want to be one of them? If yes then do your research or talk to a credit counselor to be aware of the mortgage myths making the rounds today. To get you started, following are three most common mortgage myths credit counselors want you to ignore.
A 20 percent down payment is necessary
This is probably the biggest mortgage myth making the rounds today. Therefore, you need to know this—you don’t necessarily need to make a 20 percent down payment. Instead, there are ways for you to secure mortgage financing with minimal down payment provided you qualify as a borrower.
Also, some people will tell you that paying less than twenty percent down payment can be damaging in the long-term. While there are some disadvantages of making less than twenty percent down payment, it is by no means a damaging act.
Pre-qualification guarantees the loan amount
If you’re looking to buy a home and want to get a general idea of your budget then getting pre-qualified is necessary. However, it’s important for you to keep in mind that pre-qualification doesn’t mean that you’re guaranteed the loan amount. In order to find out how much you can logically expect to be approved for, your lender considers your credit report and assets during pre-qualification.
However, the lender doesn’t explore your finances during this stage and therefore isn’t making any commitments to you. Instead, you’re guaranteed the loan amount once you’re pre-approved simply because pre-approval is a much more comprehensive process. Before approving you for a loan amount, the lender will find out everything they want to know about you.
Renting is a more cost effective option
Another common myth is that renting a home is cheaper than buying one. However, the truth of the matter is that, compared to renting a home, mortgaging a home is always cheaper. How? When you rent a house, maintaining the house is the responsibility of the landlord. However, what most people do not know is that the ‘cost’ of maintenance is included in the rent you pay. When you volunteer to maintain the house, the landlord charges you a lower rent. Either way, you’re paying to maintain a house which eventually, at some point of time, you’ll have to vacate. With a mortgaged home, that is not the case. Also, when you rent a home, you’re doing nothing but throwing away your hard-earned money every month. On the other hand, when you mortgage a house, you give yourself the opportunity to build equity.
In addition to the aforementioned myths, there are many others myths related to mortgage. However, the myths mentioned above are the most common myths about mortgage and ones credit counselors want you to ignore.