- Myth: Interest rates represent the true cost of my mortgage
Fact: Your interest rate is just one part of the total equation that determines the real cost of your mortgage, which includes the cost and fees of the loan, etc. It’s better to look at your APR – Annual Percentage Rate – to see the real cost.
- Myth: My credit isn’t great so I won’t qualify for a mortgage
Fact: Mortgage loans are actually easier to get now even without a sterling credit score. In fact, banks and lenders have eased lending standards, making it easier than ever to buy a home without a good score, even with a bankruptcy, foreclosure, short sale, etc. on your credit. According to mortgage software company Ellie Mae, 76% of homebuyers’ purchase loan applications are getting approved for the first time in history. Additionally, FHA loans can help borrowers with credit scores as low as 500!
- Myth: Getting prequalified and preapproved are the same thing
Fact: A pre-qualification letter references the loan amount that the lender THINKS you’ll be able to borrow, based on your income and credit profile. It’s just an estimate IF everything checks out and there are no significant changes or extenuating circumstances.
A pre-approval, however, does include those steps, using valid documentation and financial facts – not just speculation and generalities – when fitting someone for a mortgage loan. A pre-approval letter is a reasonable certainty that you meet the requirements of a specific loan.
- Myth: I need to put 20% down to buy a house.
Fact: Back in the good old days most homebuyers did need to come up with 20% of the purchase price as a down payment. But these days, banks and lenders know that it’s nearly impossible for the average modern homebuyer to save that much. The good news is that there are plenty of great loan programs that allow you to put only 10%, 5%, or even only 3.5% down in the case of FHA loans. Additionally there are still programs that may offer additional down payment assistance for qualified buyers. Contact us for more information about buying a home with a low or no down payment!
- It’s better to wait
Fact: This is one of the best times in history to purchase a home. Why? Interest rates are still at near all-time lows, while the cost of renting has skyrocketed in most metropolitan areas around the country. However, buying a home with a low interest rate allows you to essentially pay yourself with your mortgage every month, enjoying the great tax benefits of home ownership, paying down your loan principal, and amassing equity. But hesitation will cost would-be homebuyers, as interest rates are expected to rise steadily in the future as the Fed raises rates. Buy now and lock in a great low rate!
- Myth: I’m single so I can’t buy a house.
Fact: 60% of first-time homebuyers are single! In fact, the fastest growing demographic of first time buyers is actually single professional women in their 30s. With today’s low credit scores and flexible loan programs that allow people to start with only a very small down payment, it’s a better time than ever to purchase a home as a single person.
- Myth: Checking your credit will really hurt your score.
Fact: In reality, having someone pull your credit won’t really affect your credit rating. The different types of credit inquiries are broken down in two general groups; hard inquires and soft inquiries. Hard inquiries occur when a bank, financial institution, lender or credit card accesses your credit report for the purpose of making a lending decision. Soft inquiries, on the other hand, are when a person or company checks your credit report. Usually these come from when an employer checks your credit, preapproved credit card offers, and when you pull your own report.
Soft pulls don’t hurt your score at all and hard pulls won’t lower it significantly if you don’t apply for loans irresponsibly and erratically. The credit bureaus know that you’ll get your credit pulled several times when shopping for a new loan so if you do them within a certain tight timeframe, like within 30 days, they’ll just count them as a single credit pull.
- Myth: It’s cheaper to rent a house than to buy.
Fact: Renting is now twice as expensive as owning a home! That’s the conclusion of a new study by the real estate website Zillow, which found that renters paid an average of 29.9% of their monthly income toward rent compared to an average of 15.3% for homeowners. In addition, more renters are paying at least 30% of their income toward housing. That’s a marked increase from only 18% of renters paying more than 30% of their income a decade ago. California is one of those states where at least half of all renters pay more than 30% of their income toward rent.
Remember that everyone pays a mortgage every month and everyone buys a house – it´s just a matter if it´s yours or your landlord’s!
- Myth: My bank or an online lender will give me a better deal on my mortgage
Fact: Online lenders are notorious for advertising teaser rates just to hook consumers, but then baiting and switching them into a higher rate at the last moment, often jeopardizing the whole home purchase. They’re also known for charging exorbitant hidden fees AND taking way too long to close the loan. Many people walk into their bank to get a home loan, but remember that you are just another number to your bank and they represent their own interests – not yours – like a mortgage broker will. As mortgage brokers, we can choose from any of the banks and lenders with the best rates available, make sure we represent you in the lending process and always deliver what we promise so you get the best low-cost, low-rate loan possible.
- Myth: Owning a home is risky
Fact: Home ownership is one of the smartest and most stable investments you could ever make. Did you know that among millionaires and financially successful people, 95% attribute owning real estate to their wealth? What IS risky is buying a home and expecting to sell in a year or two for a big profit, or getting a short term or volatile adjustable loan on your property.
There are many benefits to home ownership (especially the tax breaks!) but the fundamental fact is that real estate always goes up in value if you hold onto it long enough. Of course there are market swings and fluctuations, real estate booms and then corrections, buy you don’t realize that loss unless you sell during that time – you can just wait for it to go back up in value. And over the history of real estate in the United States, there has never been a decade where houses haven’t appreciated in value.
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