Buying a home is a huge financial decision, so it’s no surprise that there are a lot of myths and misconceptions about mortgages. From the amount of money you need for a down payment to the type of loan you should choose, there’s a lot of conflicting information out there. So don’t let the myths fool you – get the facts and ensure your mortgage works for you! To help you make the best decision for your situation, this article will look at some of the most common mortgage myths and the truth behind them.
- 1 How A Mortgage Works
- 2 Financial Benefits Of A Mortgage Loan
- 3 Common Mortgage Myths
- 4 You Need 20% Down
- 5 You Need Perfect Credit To Get A Mortgage
- 6 Having Debt Prevents You From Getting A Mortgage
- 7 Pre-Qualified And Pre-Approved Are The Same Thing
- 8 If You Have Already Been Denied Once, You Can’t Get A Mortgage
- 9 Know The Truth Behind These Common Mortgage Myths!
How A Mortgage Works
A mortgage is a loan that helps individuals or organizations secure their ideal property. It allows them to purchase the home they have in mind without paying the whole amount upfront. To do this, there are two types of mortgages – fixed-term and variable-rate. Fixed-term mortgages offer borrowers security and protection as the same repayment rate remains for the entire duration of the loan.
Whereas, with variable rate mortgages, interest rate fluctuations can happen depending on outside market forces, which may lead to higher repayments for the borrower. Both mortgages contain features such as an option to pay off more than just your minimum monthly payment and early repayment options should you make bigger payments when funds are available.
Ultimately, a mortgage is a loan that one takes out to purchase or renovate a property, but it also comes with added financial benefits if managed correctly.
Financial Benefits Of A Mortgage Loan
There are many financial benefits to taking out a mortgage loan. First and foremost, there is the security that you will have your dream home once you make all of the appropriate repayments on time. Second, if you have good credit and meet other eligibility requirements, you may be able to secure cheaper interest rates than you would with other types of loans, such as personal loans.
Other financial benefits of a mortgage loan include the ability to deduct any interest paid on your tax return and build equity in your home over time. So if you are considering buying a property or renovating one, consider taking out a mortgage and enjoying all of these great financial benefits!
Common Mortgage Myths
Now that you have a bit more information about how mortgages work and some of the perks of getting one let’s look at some of the most common mortgage myths. These ideas tend to circulate due to a lack of understanding about how mortgages work, so it’s essential to get the facts straight before making a decision.
You Need 20% Down
When buying a house, many buyers are under the false impression that they need to put down a 20% down payment to get on the property ladder, which isn’t necessarily the case, though; other mortgage options can help make purchasing a home possible with little or no money down. With the correct information and advice from an experienced mortgage broker, buyers today can get a great home loan deal even if they don’t have a 20% down payment ready.
Options like low-down-payment mortgages, government programs that help with down payments, and mortgage refinance loans make it possible for buyers to get the home of their dreams with little or no money. So don’t let the myth about needing a large down payment prevent you from securing your dream property.
You Need Perfect Credit To Get A Mortgage
Purchasing a home is one of the largest and most important investments you’ll ever make, but it’s sometimes so overwhelming that many people never take the plunge. Another one of the biggest myths floating around is that you need perfect credit to get approved for a mortgage. In reality, most people don’t have perfect credit and can still attain mortgages – the only caveat is that they may not qualify for the best rates.
Suppose you have good credit but not perfect. In that case, some lenders offer competitive rates that will help get you into your dream home without an uncompromising level of perfection. The key is to shop around and see what’s available; put in enough effort, and you can find loans with manageable terms and interest rates.
Having Debt Prevents You From Getting A Mortgage
Like the credit score myth, many believe that having existing debt can prevent you from getting approved for a mortgage. However, lenders have gotten much more flexible about this over the years, and today, several options are available that can help you get approved even if you have some debt or a less-than-ideal credit score.
Debt consolidation loans, credit counseling, and working with a mortgage broker are just a few of the strategies that can help you get your finances in order and then qualify for better terms on a mortgage. So if you have debt and have been putting off purchasing a home because of this roadblock, it’s time to take action and learn more about the various options.
Pre-Qualified And Pre-Approved Are The Same Thing
Pre-qualification refers to an estimate of how much you may be able to borrow from a lender based on preliminary information provided by you, such as your income and debt payments. It is a common misconception that pre-qualified and pre-approved mortgages are the same. Even though the terms are often interchangeable, this is not the case – there are stark differences between them.
The main difference between pre-qualification and pre-approval is that when you get pre-approved, you receive an indication that you have been approved for a mortgage, which means a creative, strong negotiating position when it comes to purchasing a home. On the other hand, pre-approval involves a more in-depth process. A lender does a full review of your financial information and qualifies how much home you can afford.
If You Have Already Been Denied Once, You Can’t Get A Mortgage
Many people mistakenly believe that applying for a mortgage loan and being denied once bars them from any future loan approvals, which is not true. Many lenders are willing to look past any credit hiccups or financial missteps to provide the home financing someone needs to become a first-time homeowner or purchase their next dream house.
Borrowers must understand the process of applying for a home loan and know their rights when reapplying if they have been previously declined. With the right preparation and research, most applicants should have no difficulty receiving approval the second time.
Know The Truth Behind These Common Mortgage Myths!
Whether you have perfect credit, some debt or less than 20% down, many options for securing a mortgage are available. Many believe they need to have their finances in order before taking the plunge into home ownership, but this is simply not true. With the correct information and preparation, you can get approved for a mortgage and start the process of buying your dream home. So don’t let common mortgage myths hold you back – do your research, make informed decisions, and you’ll be living in your dream home in no time!