Dispelling Myths About Mortgages: Differentiating Fact from Fiction

Particularly for those purchasing their first home, mortgages can be complicated. Inaccurate information and poor guidance might result in expensive errors when purchasing a home. The most prevalent mortgage myths have been compiled and disproved by CCCU to assist you in navigating this significant stage of your life. Remember these pointers when you begin your search for a home!

1. Debt or less than a 20% down payment prohibits you from purchasing a home.

It can be intimidating and confusing to purchase a home, particularly for first-time purchasers. Mortgage myths and misunderstandings are easy to fall victim to, and they might prevent you from becoming a homeowner. A lot of people think that in order to qualify for a mortgage, you have to put down at least 20%. Although this is the recommended down payment amount by financial experts to avoid private mortgage insurance (PMI), qualified borrowers might choose to apply for financing programs that have lower down payment requirements or demand no down payment at all. Before you go shopping, it's crucial to get pre-approved for a mortgage in order to know how much you can afford to borrow. This procedure can make you more competitive when you apply for a loan because it entails a more in-depth examination of your financial records and credit report. Find out more about how to apply for a mortgage and our mortgage procedure.

2. If you've previously been rejected for a mortgage, you cannot receive one now.

Although it's sometimes one of the most daunting life experiences, purchasing a home can be one of the most thrilling and fulfilling. It can be challenging to distinguish fact from fiction and feel confident in your homebuying process, especially with all the mortgage misconceptions out there. It's never too late to start along the path to homeownership, even if you have bad credit or have previously been denied. Having an open dialogue with a Northpoint Loan Officer will help you understand your alternatives and position yourself for positive outcomes. Recall that there are more options for purchasing than making a 20% down payment and that applying for a mortgage does not always lower your credit score (lenders usually regard numerous inquiries as one inquiry). Are you prepared to begin looking for a home? Obtain preapproval right now.

3. The interest rates on mortgages are the same regardless of the lender you choose.

One of the most significant and costly purchases the majority of people will ever make is a house. It follows that many homebuyers frequently experience worry when it comes to mortgage rates. But it's crucial for prospective homeowners to realize that a variety of factors affect mortgage rates. For instance, mortgage rates are directly impacted by the monetary policies of the Federal Reserve. Higher short-term interest rates make it more costly for banks and other lenders to borrow money, which raises borrower mortgage rates. In addition, mortgage rates fluctuate frequently throughout the day in response to economic data. Similar to this, global occurrences like pandemics and wars have an effect on the bond and stock markets, which in turn has an effect on mortgage rates. Although some buyers may prioritize obtaining a mortgage with the lowest interest rate, it's crucial to take into account all of the expenditures related to a loan. This covers the interest rate, length of the loan, and additional costs such as property taxes, origination and appraisal fees, title insurance, and mortgage insurance.

4. Renting is less expensive than home ownership.

Although owning a home comes with a greater financial commitment, security and the opportunity to accumulate equity are two benefits. Furthermore, purchasing a home can be the best option for many purchasers, given the current competitively low mortgage rates. In contrast, renting is usually less expensive in the short run than owning. For people who are unsure of how long they will live in a particular location or who anticipate moving for work soon, renting can be a great option because it has a lower upfront cost (usually a security deposit and move-in costs that include renters insurance) and no property taxes or HOA fees. But it's crucial to keep in mind that renting is not a "waste of money." Although the landlord receives the majority of your rent payment each month, you are really investing in yourself, and there may even be future tax advantages. Find out more about being a homeowner and the reasons it might be a wise decision for you.