“My credit score is a disaster”
“The whole mortgage process is confusing”
“My debt profile is too high; I don’t think I can qualify for a loan”
Every day, I hear these statements from people who are looking to buy their first home. Much like these home buyers you have heard different things about getting a home loan. You’re already thinking of abandoning the idea of buying a home, but we’re here to set the story straight.
In this blog, I will be debunking seven (7) myths you probably have read from “internet mortgage gurus” about home loans.
1. You Must Put 20% down to Buy a House – You do not need to put down 20% to buy a house. Most loans need less than 6% down. In fact, most FHA loans only need as little as 3.5% down. If you qualify, loan programs through the VA often don’t demand any money down at all. You can also take advantage of down payment help programs.
2. You Need a Perfect Credit to Buy a Home – This is one of the major confusions of most home buyers. The truth is, you do not need to have perfect credit to buy a house. We have had clients buy their dream home with credits as low as 580. While having a perfect credit score is great, there are other aspects to getting a home loan.
In fact, most government-back programs like VA and FHA need you to have a credit score of only 580. Also, there are options like agreeing to make a bigger down payment that can help reassure your lender.
3. You Can’t Have Any Other Debt – You can buy a house even in debt. While your debt may affect the type of home you can afford, many people in the US are either in student loan or even car payment debt. It would be unrealistic to believe that everyone who buys a house is debt-free.
The main thing your lender may look at is your debt-to-income ratio. That is your monthly debt against your income. While the rule of thumb is less than or equal to 36%, some lenders may offer you a loan with a DTI of up to 46%. If your debt-to-income is too high, speak with your lender for possible solutions.
4. You’ll be Stuck with a Terrible Interest Rate – You may have heard from your friends that getting a mortgage involves being stuck with a high-interest rate for the life of the loan. This isn’t true because interest rates are at a historic low and are likely to be the same for the near future.
Moreover, you can decide to refinance your loans to a lower rate with no mortgage insurance in years to come. We have had clients refinance their loans or switch lenders down the road.
5. Renting is Cheaper Than Buying – You may think you can’t afford a home but what about all the money you’re spending on rent? When you pay your mortgage, the money goes into the equity of your home. That is, you’re building your wealth as the years go by. You’re investing in your family’s future instead of paying someone else monthly.
With a fixed-rate mortgage, your interest payments will stay the same for the life of your loan.
6. Getting Pre-Qualified Is the Same as Getting Pre-Approved – Most first-time homebuyers tend to confuse these two terms when looking to buy the home. While they may sound the same, there is a whole lot of difference between them. You can get pre-qualified by your lender by answering questions about your finances. A pre-approval involves serious vetting by your lenders before approving your loan amount.
These days, pre-qualification doesn’t mean much when buying a house. Sellers usually want home buyers to present a pre-approval letter with their offers. This shows the seller your ability to afford the home. We advise that you get pre-approved before looking at houses.
7. You Need to Be an Expert to Get a Mortgage – Whenever I read social media posts on getting a home loan, there is always someone in the comment section complaining about how hard it is to get one. It isn’t a difficult or time-consuming process. You don’t need a degree in taxation or finance to get a mortgage.
All you need is to partner with the right realtor, like Kelli Salter. Our preferred local lender will help relieve you of the burden and get you the right loan amount you deserve. Above all, we’ll guide you through the whole home buying process and get you into your dream home as fast as possible.
Buying a home is a life-changing decision. We can help you find the perfect home and the right local lender for you. If you need help in preparing for a home purchase in Jacksonville NC, we’re here to help you.