Buying a home can be a great long-term investment for your family. Despite how exciting it may be to get the process started, there are a lot of myths that can side track your focus. Sifting through what is true and what’s a myth can be difficult, especially if you are a first-time homebuyer. Below you will find the top mortgage myths debunked.
Top Mortgage Myths Debunked
Consider the following myths before you begin the home buying process.
Myth—20% Down is Required:
This is not a hard rule and there are plenty of loans that do not require 20% down. For borrowers who don’t have a 20% down payment for a home, qualifying buyers can put down as little as 3.5% for government-backed loans. Veterans also have the privilege of putting no money down with VA loans. For those who cannot put down 20% and do not qualify for any special loan programs, you can get private mortgage insurance. This allows you to put less down in the beginning (for a monthly price) to account for the lender’s risk.
Myth—Good Credit Only:
If you don’t have excellent credit, you don’t have to count yourself out. While your mortgage lender will look at your credit history, that is only one part of the analysis. Other factors include the location and type of home you are buying, your debt to income ratio, the terms of the loan, and any co-borrowers, to name just a few. There are a number of programs for those who have less than excellent credit.
Myth—Only the Rich Can Afford Homes:
Depending on your location, you can likely afford a mortgage if you can afford monthly rent. It is important to talk with a qualified lender to determine how much you can afford and what your monthly payments would look like. The lender will consider your debt, income, and savings to determine how much you can afford each month.
Myth—Mortgages are More Expensive than Rent:
Many people assume that if they are struggling to pay rent, there is no way they could afford a home. Depending on your location and the type of home you are considering, sometimes it can be more affordable to pay your monthly mortgage than your rent. In the long-term, it is an investment as your monthly mortgage payments are going back into the equity of your home. If you can afford it, a mortgage can be a long-term investment due to the major value of real estate.
Myth—Mortgages Cannot Be Negotiated:
If you are unhappy with your interest rate, fees, or down payment amount, talk with your lender. If you are a seasoned home buyer, real estate professionals can be helpful during this part of the process. Los Angeles lender negotiation experts can be invaluable when it comes to mortgage negotiations.
Myth—Interest is the Most Important Factor:
The interest rate on your loan is the amount you will pay to borrow the money. Low interest rates may seem like the top factor when it comes to loans, but that is not the case. The interest rate doesn’t include any other costs, such as origination fees, closing fees, document fees, or finances charges. Examine your annual percentage rate (“APR”) as that provides a more comprehensive look at your loan.
Professional Lender Negotiation Experts
No matter where you are in the home buying or selling process, having trusted professionals on your side can make the process much smoother. Apex Resolution has helped countless clients find creative financing solutions. Contact the top Los Angeles short sale realtors today for more information!