4 “TRUTHS” ABOUT MORTGAGES YOU NEED TO DITCH RIGHT NOW
If you’re one of the people letting these mortgage myths get in the way of taking the first step to home ownership, then it’s time to get out of your own way!
1: “I Need tons of cash upfront”
Many first time buyers are stuck in the mindset that you need a 20% down payment to even consider buying a home but did you know that you can now lock down a good rate with as little as 5-10%?
Yes, larger down payments are still a great way to avoid private mortgage insurance but not having that amount of cash lying around no longer has to be a deal breaker.
Once you let go of this myth and do some research, you may find a whole new world of options opening up for you.
2: “OK BUT I NEED A PERFECT CREDIT SCORE RIGHT?”
We’re not going to sugarcoat it. The higher your credit score the more options you have access to and that likely means more favorable interest rates.
But the good news is that poor credit doesn’t have to be an insurmountable obstacle. There many options available, including for those on lower incomes and credit tiers so do your research, and talk to different lenders to find out what could be a good fit.
In the meantime there are lots of online resources available to help you build up your credit and/or cash reserves.
3: “what about payment affordability? as long as it’s less than 36% i can go for it right?”
There is an old guideline that gets wheeled out about matching the principal, interest, taxes & insurance (PITI) to 36% of your income and it’s not a total myth; lenders do often use this as a benchmark to assess what they will offer.
However your lender only has part of the picture. Your true budget is dependent on your actual spending habits and lifestyle priorities so make sure you are accounting for everything you need (and want!) to spend money on to avoid landing yourself in a tight spot.
4. “GOTCHA. AND MORTGAGE RATES? ALWAYS GO WITH THE LOWEST?”
Feels like a fair assumption right? But in truth, a mortgage loan is very complex and there are always lots of variables when buying a home, meaning lots of opportunities for things to go wrong. It’s important to pick a mortgage lender who understands the business and is willing to work with you through this process.
For example, a common issue for lenders is getting comparable properties to ensure the mortgage is properly secured. But because house value is so dependent on local area, assessing properties even just a block out, can really skew the analysis.
A mortgage lender who is local has invaluable insight when it comes to assessing the market correctly.
STILL HAVE QUESTIONS?
With nearly two-thirds of non-home owners citing affordability as the main reason for not purchasing property, and these pervasive myths rarely being called out, it’s easy to fall into a defeatist mindset about getting on the property ladder but your Zillow fantasies may not be as far from reach as you believe.
And even if buying isn’t an option for you right now, educating yourself on the avenues open to you is a key first step in building a plan to get there.
Want to talk to TDO about how we can help get you on your buying or selling journey?
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