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Buying a home is a significant financial and personal milestone, but it can also be accompanied by various misconceptions that may deter potential buyers or lead them down the wrong path. In this guide, we will debunk 5 of the most common myths surrounding the homebuying process.. From down payments and credit scores to the order of crucial steps, we'll provide you with the facts you need to understand the realities of homebuying and achieve your homeownership goals!
MYTH #1: You Need To Put 20% Down
MYTH #1: You Need To Put 20% Down
REALITY CHECK: While a 20% down payment can help you avoid private mortgage insurance (PMI) and potentially secure a better interest rate, it's not a strict requirement. There are various loan programs available that allow for lower down payments, such as FHA loans (3.5% down) and VA loans (0% down for eligible veterans). However, a larger down payment can still be beneficial.
MYTH #2: Excellent Credit Is Required
MYTH #2: Excellent Credit Is Required
REALITY CHECK: While a higher credit score can lead to better loan terms and interest rates, you can still get a mortgage with less-than-perfect credit! Many lenders offer loans to borrowers with lower credit scores, but you may face higher interest rates or require a co-signer to qualify. Government insured loans like an FHA loan is a great option for those who are currently working on their credit but still have the goal of homeownership. A trusted, local lender can help examine your financial situation and help choose the right path for you.
MYTH #3: Pre-Approved Means Your Loan Is Guaranteed
MYTH #3: Pre-Approved Means Your Loan Is Guaranteed
REALITY CHECK: Preapproval is a significant step, but it's not a guarantee of loan approval. Lenders will still need to assess the property you intend to purchase, and your financial situation can change between preapproval and closing. While it strengthens your position, final approval is contingent on various factors.
MYTH #4: House-Hunting Is The First Step
MYTH #4: House-Hunting Is The First Step
REALITY CHECK: Before house hunting, it's crucial to start with prequalification or preapproval. Prequalification provides an estimate of how much you can borrow, while preapproval involves a more in-depth financial review by a lender, using your W-2's, pay stubs, tax returns and other financial documents to preapprove you for a mortgage. This step helps you establish your budget (thus avoiding heartbreak seeing houses outside your price range!) and makes your offers more appealing to sellers. As your local realtor, I can recommend you to trusted lenders who will help guide you through the preapproval process.
MYTH #5: Your Mortgage Includes Just The Home Price Plus Interest
MYTH #5: Your Mortgage Includes Just The Home Price Plus Interest
REALITY CHECK: A mortgage payment typically consists of more than just the principal (purchase price) and interest. It also includes property taxes and homeowners insurance, which are often paid into an escrow account. Additionally, if you have a loan with PMI (private mortgage insurance), that cost is included as well until you reach a certain level of equity.
THE BOTTOM LINE: Understanding and dispelling these myths can help potential homebuyers make informed decisions throughout the homebuying process and avoid unnecessary stress or misconceptions. It's essential to consult with a knowledgeable mortgage professional and real estate agent to navigate the process successfully. When you decide the time is right for you to purchase your home, I'm here to help!
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