Getting a mortgage might seem scary. It certainly doesn’t help that there’s a lot of misinformation about mortgages circulating these days. But if you are armed with the truth, you will find yourself in a better position to make a decision about your future mortgage. Here are a few myths and the truths behind them:
Mortgage Loans Are Expensive
A lot of people say that mortgages are extremely expensive and aren’t worth it. This isn’t true at all. After rent payments, and you already have enough extra cash to be able to afford a car or vacations, then you can probably afford a mortgage. Look for local mortgage brokers to explore your options.
You Need at Least 20% Down Payment to Get a Mortgage Loan
While yes, a 20% down payment is necessary to prevent having to pay for mortgage insurance, this isn’t the only way to get a mortgage loan. There are government loans by the likes of the FHA (Federal Housing Administration) and the Department of Veteran Affairs that have as little as a 3.5% down payment. Low down payments will mean that you need private mortgage insurance (PMI), so it’s a bit of give and take.
You Need Great Credit to Get a Mortgage Loan
You definitely don’t need great credit to get a mortgage loan. There are many programs like the FHA’s that allow for people with less-than-stellar credit scores to be able to afford mortgages. That said, a good credit score allows you to get better deals on mortgages. So, do your due diligence when you’re seeking a house; pay off credit cards and other debts on time to improve your debt-to-income (DTI) ratio.
Renting Is Better Than Buying a House with a Mortgage Loan
Sure, there are some benefits to renting a place, such as not having to worry about property maintenance or transferring to a different location with no hassle. However, paying rent is just giving someone else your money for no long-term returns. Meanwhile, buying a home is an investment. The more money you put into it, the more value you get. In fact, when you decide to sell your house, real estate values will likely be higher, and you will actually make a profit. That’s clearly much better than renting.
The Lowest Interest Rate Is Best
When looking for a house, seeking the lowest interest rate is very important. However, you should remember that there are other expenses to consider, such as property tax and insurance and homeowners’ association dues. It might be worth it in some cases to have a lower closing cost in exchange for a slightly higher interest rate.
Misinformation is the enemy. Don’t let it force you to make poor financial choices. Now that you’re more informed, you can easily decide if getting a mortgage loan is best for you. For more information, get in touch with mortgage experts!
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