Introduction

For many first-time home buyers, buying a home is the largest purchase they will ever make, thus it's only natural for novice mortgage shoppers to question what goes into getting off on the right foot. Mortgages have many myths and misconceptions that can create even more confusion when applying for a mortgage, so here are some frequent points which you might not know! To ensure you do not get hoodwinked and are able to take the right drops, here is a list of 7 mortgage myths that we believe every first-time home buyer should know about. Understanding these myths will give you more confidence and a clear-eyed approach to buying a home.

Myth 1: You need an excellent credit to get a mortgage

One of the most common myths is that you must have a perfect credit score to get approved for a home loan. Though a stronger FICO score may provide you with more mortgage options, lenders do offer products for homebuyers of all credit scores. While having a good credit score is important, do not let the threat of it not being spotless stop you from diving into real estate streams. In addition, there are other factors reviewed beyond your credit score like income and employment history as well respective Debt-to-Income Ratios. But do your homework and talk to a mortgage professional about the types of financing available that might mesh with your own financial circumstances.

Myth #2: You Have to Put Down 20%. Can you buy a house with no down payment?

A 20% down payment is often the first thing that comes to mind for many would be home buyers when they are considering buying a house. Though the 20% down can help you avoid paying private mortgage insurance (PMI), there are other options to consider. Most lenders have low-or-no down payment programs: some as low as 3% for conventional loans or even 0% for VA and USDA-backed loans. It is important to take a deep dive into your opportunities and speak with a mortgage professional about which strategy best accommodates both when you are looking at investing down payments as per where we stand currently. So don't let the myth of needing a huge down payment prevent you from owning your home.

Adjustable-rate Mortgages are a bad move, period (Myth #3)

First time homebuyers often have a common misconception that an adjustable-rate mortgage (ARM) is always associated with risk or an unfavorable method. Though they often come with rates that are too unpredictable to rely on, some ARMs may offer lower introductory fixed rates than a 30-year loan. This option can be applicable to buyers who know they are going to sell or refinance before the introductory rate period is over. Before you even decide on a mortgage type, it is crucial to sit down and consider both your financial goals and Long-term plans. By meeting with a trustworthy mortgage advisor, you can weigh out the benefits and drawbacks of ARMs for your long-term homeownership goals.

False Belief : Pre-qualification and pre-approval mean the same thing

There is also a common misconception among first-time homebuyers that pre-qualification and pre-approval are equal. Although both start out with a lender looking into the current state of your financial health, they each serve separate purposes. A pre-qualification is generally an informal estimate of how much you might be able to borrow, based on self-reported information. Pre-approval, on the other hand, is more involved and means that a lender has looked over your financials to ensure you are not borrowing above what you can afford. This allows you to streamline the next steps in your home purchase, while also making yourself more appealing when putting an offer on a house.

Myth #5 - You cannot buy a mortgage if you are self-employed

This is one of the most common misunderstandings that having your own business also means you cannot get a mortgage. Getting a mortgage approved when you are self-employed can be slightly more difficult than it is for the employed, but by no means impossible. Lenders may also require additional documents or proof of your finances and income like tax return, profit and loss statement, bank statements etc. But using a lender that has experience dealing with those who are self-employed, as well as having your paperwork together, can improve the odds of being able to get approved for a mortgage. You really should entertain the thought of purchasing a house in spite of your self-employment status.

Myth #6: You are stuck with your first lender.

Most new home buyers think they have to stick with the lender that pre-qualified them for a mortgage. This is not true. You can choose to shop around and compare offers from a couple of lenders so you receive the most desirable mortgage terms given your state of financial health. We can do you one better by telling you not to limit yourself based on your current situation; there may be other options out there with lower interest rates, fees or more favorable terms that will actually cost less in the end. You do not have to stay with the original lender, but it is essential that you shop for lenders and pick one who will give you full credit towards being a homeowner.

Myth #7: Always go with the lowest rate

The low-interest rate is a little bit tempting, but there are things that you should consider in choosing the right mortgage for your next home. Other aspects that also greatly affect the overall costs and quality of your loan include mortgage terms, closing costs, as well as lender performance. Choosing the lowest interest rate could also result in extra hidden fees or terms which might bring about even more charges over time. Be sure to take the time to consider all parts of your mortgage offer which might answer not only your financial but also traditional needs. And the best mortgage to remember is not just about interest rate, but most other factors that will contribute to making it suitable and flexible enough for you.

Conclusion

Mortgage Myths Made Simple for the First-Time Homebuyer These myths can sidetrack you from making the right financial choice for your money goals. It is important to remember that a low-interest rate, while helpful, is only one part of the equation when selecting a mortgage. Weight this factor with loan terms, closing costs and the reputation of a lender to get those that work for you. So do your research and ask the right questions so that when you enter into a home buying situation, you know exactly what is best for yourself. The above provides standards of what to expect and guidance before paving your journey into homeownership.