Depending on who you talk to, you might hear multiple different answers to the same mortgage-related question. A lot of that comes from misinformation being passed around and not speaking with lenders for verification. Here are some common mortgage myths broken down and replaced with the facts:
#1 You must put 20% down when purchasing a home.
Most Americans need a mortgage loan to buy a home, and many first-time home buyers have trouble reaching that 20% for a down payment. Fortunately, there are multiple low or no money down options. The Fannie Mae Home Ready and Freddie Mac Home Possible programs are two that allow eligible borrowers to put down as little as 3%.
In addition, VA and USDA loans allow 100% financing. VA loans are for those who fall in the guidelines of being qualified veterans, active duty service members. USDA loans require the property to be in rural areas defined by the USDA.
#2 Every lender will give you the same rate.
One common misconception is that no matter where you go, you’ll get the same mortgage rate. On the contrary, it’s very important to shop around for the mortgage loan that’s best for you. Terms, costs, and interest rates can all vary, so always get a second opinion!
#3 A pre-qualification makes you eligible to buy a home.
Unfortunately, this isn’t the case. A pre-qualification is made based on the borrower’s word, before reports are run. It does not guarantee a borrower’s qualification.
A pre-approval is a tangible letter written by the lender or broker stating, with no uncertainty, whether a borrower is approved to purchase a home or not. Credit reports have been run, and income was verified. This letter is something that the borrower will give to their realtor to prove they are good to go.
To learn more, visit our blog on Pre-Qualification vs. Pre-Approval.
Once this step is complete and an offer is ready to be made, the mortgage process continues with underwriting and specific documentation. Once cleared, the borrower is now eligible to purchase the home.
#4 You need an excellent credit score to get a good deal.
Having an excellence credit score will absolutely help but is not the end of the world if you don’t. At Loan Pronto, we can work with borrowers who have a 580 credit score and above! With a 580, we can process an FHA loan and a 620 with a conventional loan.
#5 Renting is less expensive than buying a home.
Comparing payments might throw you off and lead you to think that you are getting a better and cheaper deal if you just stick to renting. The truth is that pros to owning a home far outweigh the pros to renting. When you own a home, you start to build equity in that property which is very valuable. Basically, by paying your mortgage every month, you are putting money into the home rather than throwing your money away when you pay rent. Also, your mortgage payment is fixed and will not change throughout your loan term, but with renting, the property manager is allowed to increase rent year by year.
# 6 The mortgage process is miserable.
Wrong. Loan Pronto was brought to life specifically to make the mortgage process more modern, innovative and always put the customer first. Our process is all digital, which means no scanning, printing or faxing, and we incorporate e-signatures throughout all documentation. We also strive to give the best customer service possible. We have zero lender fees, we give you a lender credit which goes towards your closing costs and we can close a loan in as little as 14 days!
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