Mortgage Myths

Mortgage Myths that are Untrue

Buying a home can be exciting and scary. Urban myths such as the Loch Ness Monster, Yeti’s, and Big Foot are exciting to read about but when it comes to mortgage myths, if you believe in what you hear, you may never take the first step in getting prequalified to buy a home.

I’ve been in the mortgage industry for 40 years and have helped thousands of families get into homes. Many of them thought they would never be able to buy; they don’t have 20% down, they don’t have perfect credit, renting is cheaper than owning, and the list goes on and on. Here are my top five myths that I hear most often.

Myth# 1: I need to be on my job for two years. This is not true. Lenders do look for a two-year work history, but it does not need to be with the same employer and not even in the same field. Here’s an example that will show you the flexibility we have to work with.Let’s pretend you are at a four-year college studying to be a teacher. During those four years you didn’t work and concentrated on your studies. Now that you are graduated, you’ve just landed your first teaching job and you start in 30 days. Can you buy a home? The answer is Yes!! We count the four years of schooling as history as most definitely you can buy NOW! Newly self-employed borrowers are a different story but in certain cases we can get away with one-year with a strong work history in their profession.

Myth#2: I need 20% down. This is also not true. FHA only requires 3.5% down, VA is no money down and there are several excellent conventional programs with only 3% down.

Myth#3: I need to have excellent credit. If that was the case, very few families would own homes. It is true the higher your credit score is, the better the interest rate you will receive. If your credit score is at least 620, lenders should in most cases get your loan approved.

Myth#4: Renting is cheaper than buying a home. You may think you can’t afford a home, but what about all that money you’re spending on rent? When you pay your mortgage, the money is going back into the equity of your home. That means you’re getting a real return on your investment as the years go by.

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#5: The lowest interest rate is the best option. You might be saying to yourself, “Why would this be a myth?” Many lenders advertising below market interest rates that sound tempting but there are costs associated with that interest rate and that can add up to thousands of dollars. A reputable lender should take the time and show you that paying these extra fees will take a minimum four years to reap the benefits of the lower interest rate.