If you’re a first-time homebuyer, you probably get information from people who have already been in your shoes—a friend, a family member, a colleague, etc. This recycled information gets passed along so hard that it leads to misconceptions. Most of the time, your questions and information you gather have a lot to do with a mortgage. When it comes to this, there is hardly room for error.
Therefore, before you start sorting out your mortgage requirements, make sure you know the common myths surrounding mortgages to ensure you’re on the right track when you apply.
- You’re Guaranteed the Loan Amount When You’re Pre-Qualified
Getting pre-qualified is crucial because this will give you an idea of the budget you have for a house. However, keep in mind that pre-qualification doesn’t mean the amount is approved by the lender already.
During this process, the mortgage lender will look at your credit report and assets to determine a reasonable amount you can potentially be approved for. At this stage, your lender will not dive deep into your finances because there’s no big commitment involved in this yet. Simply put, your lender will only provide you with a ballpark figure you can use to start your search for a house.
Another thing to keep in mind is that pre-qualification is different from pre-approval as the latter is more comprehensive.
- You Need a 700 Credit Score
You can let out a sigh of relief here because the 700 credit score to qualify for a mortgage is only a myth. Some lenders approve mortgages for borrowers with lower credit scores. They also allow less down payment for the house. However, this comes with consequences, such as higher interest rates. This is why you need to be mindful of the terms before you get the loan. Make sure it’s something you can repay in the years to come; otherwise, you’ll be in for stressful years ahead.
- You Need to Get a 30-Year Fixed-Rate Mortgage
A traditional mortgage is 30 years at a fixed rate, and many believe that this is the best (and only) option. The truth is, it’s not the best choice for everyone because an average homebuyer only lives in the house for around 7 years. There is no one-size-fits-all solution when it comes to mortgages, which is why you need to read the fine print and understand the terms before you decide on a type of loan.
- You Need to Refinance When Mortgage Rates Are Lower
Take into account how much refinancing will cost you and how long you plan to stay in the house. Compare the savings from a lower interest rate versus refinancing fees that will be paid upfront. So, before you get swayed by the low mortgage rates, get the full story first. Refinancing isn’t always the choice when mortgage rates are lower.
- You Need to Pay Off the Mortgage as Fast as Possible
It’s natural to want to pay off your mortgage as fast as possible because you will be debt-free by then. However, the only guarantee you get when you pay off your mortgage sooner than expected is that you will only lower your overall loan balance, but that doesn’t mean you get instant equity. Instead of paying more into your mortgage every month, consider investing the extra money you have.
Get the Right Mortgage
Now, are you ready to start the home-buying process? By knowing these common mortgage myths, you are armed with more knowledge to get started. Make the process easier by hiring an Austin mortgage broker.
For the best rates and service on your mortgage, get in touch with Skyway Financial. We are a full-service mortgage company that helps homebuyers and homeowners in California, Florida, Michigan, Texas, Tennessee, and Virginia. Chat with us to get started today!
