Mortgage 101
November 16, 2021

Common Mortgage Myths Busted

In the age of information, it’s easy to be swept up in common misconceptions about your mortgage. Knowing the truth behind these myths will help raise your confidence and prepare you for buying. Below, we’ll look at some of the most common myths and the truth behind each.

I Need to Fully Pay Off My Student Loans

While it’s true that lenders look at how much debt a person holds, you still have some wiggle room. Don’t let your student loan debt derail you from purchasing a home! Even with debt, as long as your debt-to-income (DTI) ratio is in a favorable position, you can be approved for a mortgage. A lower DTI indicates to a lender that you can take on a monthly mortgage payment and will be less likely to default on your payment.

Renting is Cheaper Than Buying a Home

Renting a space means you’re giving money to your landlord for their own mortgage and housing fees. When you are paying your own mortgage, the monthly payments you make go back into the equity of your home. Instead of having to stress about the potential of rent prices rising, rotating neighbors, and security deposits, the money you put into your home with each passing year means more benefits for you and your family.

A 20% Down Payment is Required

Paying a 20% down payment can be helpful if you can afford it. A higher down payment may offer various benefits, such as a lower monthly payment and higher starting equity, but it isn’t necessarily a requirement. Homestead Funding offers a variety of loans to fit your unique financial needs such as FHA, VA, and USDA loans.

The Down Payment is the Only Upfront Cost

While the down payment will most likely be the largest payment you make when investing in a home, don’t forget about your closing costs. These are processing fees that are independent from the down payment and often include things such as your lender’s insurance, an attorney, appraisal inspection, as well as government taxes, origination, and escrow fees.

I Need a Traditional W-2 to Qualify

If you’re self-employed or lack W-2 forms for your income, you may still qualify for a mortgage. A W-2 form simply provides a clear picture to a lender about the state of your income. You are still held to the same standards as those with traditional incomes, even if you don’t have W-2 forms. If you meet loan guidelines and have documentation of a stable, consistent, and ongoing income, you can still be considered for a mortgage.

I Need a Perfect Credit Score

It’s true that a lender will be looking closely at your credit, but a perfect score is not necessarily a requirement. An FHA loan, for example, may be acquired with a credit score lower than 700. The ability to make payments in a timely and responsible manner is the most important factor, even with debt or a lower score.

I Don’t Need a Real Estate Agent

With so many homebuying websites available, it’s tempting to try a home search without professional assistance. However, assisting in your home search is not the only function of a real estate agent. With up-to-date knowledge on the market and its changes, local service professionals, and negotiation tactics, a real estate agent is a resource that may help save you stress, time, and money.

Still have questions about the mortgage process? Homestead Funding is here to put your mind at ease. Our team of professionals are ready to walk you through the process every step of the way. Contact us today to learn more.

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