Busting 5 Common Mortgage Myths
Buying a home is often one of the largest purchases we will make in our lifetime. Because of this, there may be some confusion on what’s true and what is not. That is why we have collected some of the most common questions we’ve seen and answered them for you, to help give more clarity on your home buying experience!
1. Do I always need a 20% down payment to purchase a home?
The common thought process behind this question is that, by making a 20% down payment, you avoid needing to pay the additional Mortgage Insurance (MI) fee. This does not, by itself, cause you to be eligible or ineligible to purchase a home.
In most cases, you do NOT need to put down 20% to qualify for a home. There are many options to consider that require a much lower down payment. In some cases, you may be eligible for a loan with a down payment as low as 3.5% or even no down payment at all!
2. Should I check my credit score before looking to purchase a home?
If you are looking to purchase a home, you should absolutely check your credit before you begin the mortgage process. Know your credit score, as well as what is being reported so you can correct any inaccuracies quickly.
Correcting issues on your credit report may actually allow you to be eligible for programs you may have not have been considered for previously because lenders will analyze your credit report to determine which programs you qualify for.
3. Can I still purchase a home without having a perfect credit score?
While having a low credit score will not allow you to get the best possible rates, it is absolutely not the be-all-end-all! A credit score is not the only qualifying factor we use to determine your eligibility. In fact, there are many programs that aim to help those with lower credit scores to be eligible to purchase a home.
If you aren’t looking to purchase a home quickly, it is always wise to try to increase your credit score as much as possible before starting the process. This may help save money in the future.
To help improve your credit score, try to pay your bills on time and lower your debt-to-credit ratio. Lenders like to see you owing only about 10% to 30% of your available credit. You can also get free copies of your credit report once a year from each of the main credit reporting agencies. Make sure to correct any discrepancies to ensure your report is an accurate reflection of your actual credit history.
4. Is the best mortgage the one with the lowest interest rate?
Although important, there are many other factors that you will want to consider other than going with the lender with the lowest interest rate. For example, you may want to consider professionalism, and the loan officer’s availability, reputation, and knowledge. All these things are worth considering and can be invaluable throughout the mortgage process.
After all, you will want to ensure you are working with a professional lender that will not make a costly mistake for you later on in the process.
5. When should I start the mortgage process?
In order to set realistic expectations about your budget, consider starting the loan process and finding a loan officer before you have settled on a home. There may be some things to consider, that you haven’t thought of yet, that could affect your home-buying budget, so it is best to know what price range you want to be in before choosing your dream home.
We hope this helped break down some of those barriers that may be holding you back. Of course, there is more to it than this and everyone’s situation is a little different. To help navigate these waters, we suggest talking with a qualified mortgage loan officer to can help you determine what you qualify for and what loan can best meet your needs. For more of our most frequently asked questions, check out our Ask Sierra webpage.