Buying a home can be one of the most exciting times in your life, but it can also be pretty stressful, especially with all the misinformation about the mortgage and real estate industries floating around out there. The best way to understand the housing market is to work with a professional who can walk you through the process.
But we’ll do our best to share all the information you need to get started. Here are six of the most common mortgage myths that simply aren’t true.
Myth One. You Need a 20% Down Payment
The myth that you need a 20% down payment started because of the private mortgage insurance requirement. If you have less than 20% to put down, then you’ll be required to get private mortgage insurance to secure a mortgage. That said, you can get approved with as little as 0% down for some loan types!
Myth Two. Your Credit Has to be Perfect
The myth that you should have perfect credit couldn’t be farther from the truth. While a low credit score may affect your ability to get approved for a mortgage, and a higher credit score will significantly impact your interest rate and approval amount, you don’t need perfect credit. If you aren’t sure how your credit score will affect your chances, speak to a professional in your area!
Myth Three. Find the House, First
Many people believe you need to find your house first, then apply for a mortgage, but this could cost you valuable time and energy. One, you might not get approved in time or for the amount you’ll need to buy that dream home. And two, you won’t know until you are approved what homes are in your price range. Before shopping for homes, you must get preapproval for a mortgage.
Myth Four. Down Payment Covers Closing Costs
Contrary to popular opinion, down payments do not cover closing costs. Down payments go toward the balance of your mortgage, while closing costs are separate processing fees that you must pay to complete the transaction. So, you must remember to set aside extra money to cover closing costs and your down payment.
Myth Five. Prequalification Equals Preapproval
Many would-be homebuyers make the mistake of assuming that mortgage prequalification and preapproval are the same. And unfortunately, that’s not true. Prequalification only requires basic financial information and doesn’t indicate whether you’ll be approved. Preapproval requires in-depth financial information and should be completed before you start shopping for a new home.
Myth Six. Applying for a Mortgage Harms Your Credit
While this is partially true, there’s a big misconception attached to it. While running a credit check for a new line of credit or loan will ding your credit a little, it doesn’t last long. The credit check dilemma is a failsafe put in place to stop people from acquiring multiple new lines of credit all at once. The minor hit that your credit takes from a mortgage check will be temporary, and it isn’t likely to affect you in any way.
Looking for Homes for Sale in Northeast Florida?
Are you looking for homes for sale in St. Augustine, Jacksonville, and anywhere else in Northeast Florida? If so, you’ve come to the right place. Here at the Welch Team, we specialize in helping people find the homes of their dreams. Contact us today to get started!
And while you’re here, don’t forget to grab a copy of our free buyer’s guide. It offers a step-by-step walkthrough of the home buying process, tips from experts, and a list of our most trusted advisors (including mortgage brokers!).