You are ready to buy a new home. Now it is time to obtain a mortgage. Sadly, many people still believe common mortgage myths, and doing so hurts them in the long run. The following are eight common myths to be aware of and the truth behind them.
Don’t Shop Around
This is a myth that many people fall for and pay more than is necessary as a result. When it comes to your credit score, multiple inquiries from lenders only count as one inquiry if they occur within a 30-day period. This is true for new mortgages, refinancing, and more. It may be wise to refinance your housing loans with Dollarback Mortgage rather than obtaining a new loan once you see the low rates offered.
You Can’t Have Debt and Buy a Home
Although lenders do look at your debt load when compared to your total income, they allow debt. It’s unrealistic for lenders to expect people have no debt. What they look for before approving a borrower is the borrower’s income-to-debt ratio. They typically prefer a borrower’s debt load to be 36 percent or less of the total income.
The Down Payment Is All That You Pay Up Front
Borrowers often neglect to factor in closing costs when determining what expenses must be paid when buying a home. These fees typically run anywhere from one to two percent of the total sale price of the home. The borrower and seller may split these costs, the seller may pay them all, or the borrower may be responsible for these costs.
Perfect Credit is Required
Individuals who believe they won’t qualify for a mortgage are often surprised to learn that excellent or perfect credit isn’t required. In fact, a FICO score of 580 may be enough to obtain a loan. It never hurts to shop around to see which lender offers the best deal based on your current credit score.
A 20 Percent Payment is Required
In the past, lenders required a 20 percent down payment. This is no longer the case. For example, FHA loans usually require only 3.5 percent down. Ask the lender how much will be required when shopping around, as this could affect which company you choose to obtain the mortgage from.
Being Pre-Approved Means You Have to Use That Lender
There is no need to use a lender that pre-approved you when the time comes to get a mortgage. Now is the time to shop around. Those who do so find they can save a great deal of money by comparing lenders.
A 30-Year Fixed-Rate Mortgage is the Best Option
Although the 30-year fixed-rate mortgage remains the most popular, other options are available. For instance, someone who is buying a home but will move in a few years might find a mortgage offering a super-low rate is better for their needs. Talk with different lenders to determine the available options to see which one is right for you.
Gifts Can’t Be Used for the Down Payment
As long as the borrower can document the source of the gift, the down payment can be provided by a third party as a gift. Furthermore, grants from non-profit organizations or other sources can be used. In fact, 20 percent of home buyers use a gift for the down payment on their new home. Become knowledgeable in home mortgages before you obtain a loan for a new residence. The more you know, the easier it becomes to find the right financing for your needs. As this is one of the biggest purchases you will make in your lifetime, spend as much time as is needed to ensure the best outcome. It’s too important not to put in this extra effort.