Debunking Mortgage Myths

tiles spelling out mortgage on a wood surface

Almost all adults in this country believe that home ownership is an important part of the American dream and that it increases financial stability. But many Americans think that owning a home is out of their reach. In truth, many perceived obstacles are simply misconceptions about what is required to purchase a home. After reviewing the list here, you may discover that you’re more prepared than you think.

“Renting is always cheaper than buying a home”
Renting may be your best choice if you plan to move frequently. It usually takes up to seven years of home ownership to offset the cost of renting. However, if you plan to stay in your home for a longer period of time, buying is likely the better financial choice. Assuming that your home appreciates in value, you should realize a good profit when you finally decide to sell. Also, you can have a fixed-rate mortgage that won’t change instead of facing the risk of a surprise price hike in a monthly rental fee.

“You need to have 20% for the down payment”
The average American thinks they must have between 17% and 21% of the purchase price for a down payment. While 20% is the industry standard, many people with high credit scores are approved for a mortgage loan that requires much less down. Discuss with your lender what is possible in your case. Loan programs through the VA, FHA and USDA all have low down payment programs if you qualify.

“Once you’re pre-qualified you’re guaranteed the loan”
Although pre-qualification is not the same as pre-approval, it does give you a chance to see what loan amount you should expect from your lender. This is helpful when you are house hunting and need to know how high an offer you can make. However, pre-qualification usually does not include a credit report analysis, so you may still be denied a loan. Pre-approval for a loan amount is better that pre-qualification.

“30-year fixed-rate mortgages are the best option”
A traditional fixed-rate mortgage is likely the best choice for buyers who intend to stay in their home for many years. However, an adjustable rate mortgage may be a better choice for those who know they will move within a few years. Additionally, there are shorter fixed rate mortgages that will have a higher monthly payment, but will save a lot in interest charges. This may be a good choice for buyers expecting to retire soon. Look at all options. A traditional 30-year loan may not be your best choice.

“Mortgages are the same with every lender”
All lenders offer a variety of products, interest rates and fees for mortgage loans. Not all lenders are right for every customer, so be careful to choose one that fits your needs. The lender with the lowest interest rate may not be best because they may be new to the business or have a reputation for instability. You want a company that you can trust to deliver the mortgage package they promised and provide consistent service. As always, you should be able to turn to your real estate agent for advice. They quite likely have a mortgage company that they work with regularly who they depend upon to give their clients good deals and excellent service.

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