As life goes on with an individual constantly growing, their goals continue to grow into being a homeowner. However, misinformation is going on that also affects the perspective of future home buyers. Keeping up with those myths going on the head of everyone might be discouraging yet frustrating. The opposite of these myths is mortgage truths that most people do not know about.
Through this blog, you can clear up your mind and be confident. Along with mortgage truths, myths can warn you and help you implement better ways to find your ideal home. Here are some of the myths you might want to know about real estate.
1. Required 20% Down payment to Purchase a Home
Due to the demanding project that a house can bring, most people feel anxiety and pressure, which also define them as incapable. Being unqualified for a home might be a sad moment. Yet, this myth also has mortgage truths from private mortgage insurance sources.
About 20% is not a requirement for all, but it is only valid under the mortgage lenders of private mortgage insurance (PMI). It is simply a type of protection to compensate the mortgage lender if your mortgage loan is in default. This requirement from PMI has formed a recommendation from financial experts. This wise idea finally spreads out through various places and proves the idea of waiting to buy a home until you have 20% as a down payment. Furthermore, if you still don’t have the 20% down payment, you can still have the power to purchase a home with the help of a lender that you trust and rely on.
2. Prequalification and Preapproval are the Same
Many people may already encounter these words, especially if they are into home buying. They are in the same procedure that most people distinguish them as the same in terms of home ownership.
Pre-qualification is the term used for a procedure needed before qualifying as a home buyer. It is where the lender collects only the basic financial information you have. They rely on every self-reported financial data to issue a pre-qualification. With this information, they can easily estimate how much you can afford to take out in a loan.
While in pre-approval, it just means that the lender already verified some of the financial details you provided. Then, later on, they will require you to submit a bank statement. On the other hand, you will simply allow them to view your credit report. Through this, pre-approval became much more accurate than pre-qualification itself. In conclusion, you must have pre-approval before shopping for a home.
Pre-qualification is the primary step to moving to your dream house. But because some lenders handle both services, they can easily use these terms interchangeably.
3. It is a Must that you have a Perfect Credit Score to Qualify for a Mortgage
Your credit takes a genuine part of your home buying procedure. Your credit must be in a good state. However, it is not one of the mortgage truths that you cannot qualify for a mortgage if your credit is not good enough to support your dream home.
If you happen to be one of those individuals who have been struggling with their credit, there are still solutions. You can apply to lessen your burden regarding your credit. One of them is to organize your credit and see if some wrong items must be put on disputing action. On the other hand, you can ask for an FHA loan as another government-backed loan insured by the Federal Housing Administration (FHA). Borrowers with low credit scores and income requirements chose to have this instead of conventional loans. It is one of the things you can do to move forward with your home-buying process.
You don’t need a perfect credit score to qualify for a mortgage. If you have a problem with your credit score and have other concerns related to your finances, you can still have other options you can rely on.
4. Mortgage Application can Hurt your Credit
It is certain that whenever you apply for a new loan or line of credit, the effect can also affect your credit score. The credit score is probably higher if a person lives below their means. Preventing yourself from colossal credit card expenses and applying for other credit accounts might not be an excellent movement to provide constant assistance with your credit.
Being present with the modern world, most people are not aware of how things are going on not until it was once stated. These mortgage truths and myths are not just for you to read but also to keep in mind and prevent everyone from dealing with this misinformation. Thus, it is best to keep your trusted and legitimate real estate agent that will help you and keep you grounded with your plans and goals.