Purchasing a home is one of the most significant investments you’ll make and can be a scary and daunting prospect. Not to worry, we’re here to help. No jargon, no complicated charts – just real talk about mortgages.
We're on a mission to unravel the truth behind common mortgage myths. From down payments to credit scores, let's break down the misconceptions and pave the way for a smooth journey to your dream home.
Myth: You need to put 20% down
Reality: While it’s true you’ll likely need to put some money down, a 20% down payment isn’t usually required. Some loan types, such as FHA, and some State Housing programs may require as little as 3.5% down. USDA and VA loans often don’t require any down payment! It is however important to keep in mind that most loan programs will require PMI (private mortgage insurance) on loans with less than 20% down payment.
Myth: You need perfect credit to get a mortgage
Reality: A higher credit score may help you qualify for more loan types and a potentially lower interest rate, there are several loan programs that accept a minimum credit score of 580-680.
Myth: Renting is cheaper than buying
Reality: In many cases it can be less expensive to own a home depending on where you live. Purchasing a home will have some up-front costs associated with it, but paying into a mortgage will help you build equity in your home, instead of your landlords.
Also, with a fixed-rate mortgage, your monthly principal and interest payments will be the same for the life of your loan. With rent prices having the potential to rise every year, in the long run, it may be cheaper to have a mortgage.
Myth: The lowest interest rate is the best option
Reality: The lowest mortgage rate might seem like the golden ticket, but it's not always the best option for a couple of reasons. First off, it's crucial to understand that not all mortgages are created equal. Sometimes, a lender might advertise a super-low interest rate, but they make up for it by tacking on hefty fees and charges, which could end up costing you more in the long run.
Moreover, the lowest interest rate might come with certain conditions or restrictions that may not align with your financial goals or plans. It's like buying a super-cheap airline ticket and realizing later that baggage fees, seat selection, and other add-ons make the overall cost more than a slightly pricier, all-inclusive option.
When shopping for a mortgage, it's wise to consider the full picture – not just the interest rate. Your Northpoint Loan Officer will help you understand how to factor in fees, terms, and any other conditions attached to the loan. In the end, the best mortgage is the one that suits your unique financial situation and long-term objectives, even if it doesn't boast a rock-bottom interest rate.
Myth: You can’t get a mortgage with student loan debt
Reality: Whether or not people who have student loans may qualify for mortgages depends on their specific situations. If you’ve been making all your payments on time, have a low debt-to-income ratio, and have a good credit score, you might find it easy to qualify for a mortgage.
Myth: You don’t need a professional home inspection
Reality: Foregoing a home inspection has become popular in the last few years with the competitive housing market. While sellers may not be willing to make any updates or changes to the house based on what is found during the inspection, it is still a smart idea to have one done.
A professional home inspection can uncover issues with the home that may need to be repaired and can help you save money in the long run or even steer clear of making a bad decision. A home inspection involves checking a home’s:
Structural Components: Foundation, walls, ceilings, floors, roof structure
Exterior: Siding, windows, doors, drainage, landscaping
Roof: Roofing materials, condition, potential issues
Plumbing: Pipes, faucets, water heaters, drainage, sump pumps
Electrical: Wiring, outlets, switches, electrical panels
Heating, Ventilation, and Air Conditioning (HVAC): Furnace, air conditioning, ventilation systems
Interior: Walls, ceilings, floors, doors, windows
Insulation and Ventilation: Attic, walls, ventilation systems
Appliances: Inspection of major appliances included in the sale
Safety Features: Smoke detectors, carbon monoxide detectors, handrails, safety glass
General Maintenance: Overall property condition, potential maintenance issues
If you’re preparing to buy a home, it’s important to have the right knowledge to avoid feeling intimidated throughout the process. Connect with a Northpoint Loan Officer, together we’ll separate mortgage facts from fiction.
Remember, a 20% down payment isn’t the only route, and credit score perfection isn’t mandatory. Owning a home can be more cost-effective than renting in the long run, and the lowest interest rate isn't always the best deal. Having student loan debt doesn't automatically disqualify you, and a professional home inspection is a wise investment.
Buying a home is a life-changing decision. We can help you develop the right plan to save for a home and find the best mortgage to fit your unique needs. Find a Northpoint Loan Officer near you.