The mortgage process can be confusing – especially if you’re a first-time homebuyer. As you begin the home-buying process, it’s likely that you will encounter some myths and misconceptions about getting a mortgage. So, how do you distinguish fact from fiction? Today, we’re debunking some of the most common myths about getting a mortgage.
Myth #1: You have to have perfect credit to get a mortgage
While it’s true that having higher credit score may help you get a lower interest rate on a mortgage loan, you don’t need to have a perfect credit score to qualify for a mortgage. Lenders consider other key factors when reviewing your mortgage application, including your debt-to-income ratio, the size of your down payment, and your job history. Even though you don’t need to have a perfect credit to get a mortgage, it’s always a good idea to make sure your credit information is accurate and continue working on raising your credit score.
Myth #2: You must make a 20% down payment to purchase a home
Another common misconception is that you need to make a downpayment of at least 20 percent when buying a home. However, depending on your income, credit score, and current financial situation, you may qualify for a mortgage that requires a lower down payment. Keep in mind that paying a larger initial down payment on your home will reduce your monthly mortgage payment as well as the amount you’ll pay on your loan over time in interest. Talking to a trusted mortgage expert will help you understand your home loan options and determine how much you can comfortably afford to pay upfront for your home.
Myth #3: The cost of your mortgage is represented by the mortgage rate
All mortgages have associated fees and costs that are either paid at closing, included in the loan amount, or a combination of the two. The mortgage rate refers to the interest rate you pay each month on a mortgage loan. However, the Annual Percentage Rate, or APR, is often a more accurate measure of the cost of a mortgage loan, because it includes the interest rate as well as other costs such as processing, underwriting, loan origination, and broker fees. When comparing mortgage loans, it’s best to compare the APR instead of the interest rate to understand the total cost of the loan.
Myth #4: All mortgage loans are the same
Determining the right mortgage for you can be challenging. The truth is, there is no one-size-fits-all mortgage loan. While the 30-year fixed mortgage is common, you may be able to pay off your loan faster by choosing a fixed-rate mortgage with a 20, 15, or 10-year term. An Adjustable Rate Mortgage, or ARM, is another loan option that’s often appealing to first-time homebuyers. In general, an ARM starts with a lower initial interest rate compared to fixed-rate mortgages. After the fixed-rate period ends, the interest rate on the loan changes on a periodic basis. Luckily, you don’t need to navigate the mortgage process alone. Meet with a trusted mortgage expert to help you determine which type of loan is best for you.
At River City Mortgage, we make the mortgage process simple and easy-to-understand. River City Mortgage is a lender and a broker, which gives us access to a multitude of home-purchase financing options. We’ll help you explore your options to find the mortgage loan that fits your needs while providing guidance and support every step of the way. Contact us to learn more and get started today!