Buying A New Home: 4 Myths About Home Mortgages
Misinformation is running rampant these days. For instance, there are many myths about home mortgages that run around the internet.
And you know, if it’s on the internet, it has to be true, right? 😂
Buying a new home requires a commitment but that doesn’t mean you can’t afford one. Get the facts. Here are four myths about home mortgages.
4 Myths About Home Mortgages
1. A mortgage application should be made once you have found the right house
Buying a home is a big decision, and you’ll want to make sure it’s the right one. That’s why you need to get pre approved before you start shopping for homes.
Contrary to what many believe, you don’t need to find that perfect house before getting approved for a mortgage. What actually happens is the other way around.
A preapproval looks at your finances and gives an estimate for how much of a mortgage you can afford. This way, when you find that perfect house, you can be confident to make an offer.
2. Buying a house requires a 20% downpayment
Needing a 20% downpayment on a home is not always the case. In many cases, first-time homebuyers can obtain a loan with as little as 3% down payment, and some loans do not even require a down payment. First-time buyers often put down 10% of the home’s purchase price.
3. Applying for a mortgage requires a perfect credit score
Due to misunderstandings about credit scores, renters are less likely to become homeowners. In reality, your credit report is an important part of the mortgage process since it shows your lender you’re not a credit risk.
The higher your credit score, the better, however, lenders won’t require your score to be higher than 700 and could be as low as 580 to qualify. Keep in mind that the lower your score, the higher your interest rate will be.
4. You can’t apply for a mortgage if you have student loans or other debts
There is a common belief that applying for a mortgage loan is impossible if you are not completely debt-free. Most people have some kind of debt, like student loans or credit card debt.
One of the first things a lender considers when assessing whether you can afford a new home is your debt-to-income (DTI) ratio. DTI is the best way to gauge your risk level when it comes to mortgage loans. If you have less than 50% DTI, then you’ll be able to get a mortgage loan—even if you have other debts.
Whether you’re thinking about purchasing your first home in West Knoxville, saving for a down payment, refinancing, or moving up, don’t hesitate to contact us. Please click here for our contact page.
We’ve worked with many, many lenders in the Knoxville area and can refer several reputable lenders from which to choose. Thanks for visiting!
