- 6 First-time Homebuyer Myths
- Myth #1:
- Myth #2:
- Myth #3:
- Myth #4:
- Myth #5:
- Myth #6:
- First-time homebuyer myths debunked – Movement Mortgage Blog
- First-time homebuyer myth #1:
- 14 Myths About Home Mortgages
- Myth #1: Pre-qualified means the same thing as pre-approved
- Myth #2: Getting pre-approved guarantees you will get a home loan
- Myth #3: If you are denied a mortgage once, you will never be able to get a mortgage
- Myth #4: In order to qualify for a mortgage, you need to put at least 20 percent down
- Myth #5: You need an excellent credit score to get a mortgage
- Myth #6: FHA home loans are for borrowers with no money and poor credit
- Myth #7: Only income determines how much you can borrow
- Myth #8: Mortgage rates are the same no matter where you go
- Myth #9: It’s always best to get a 30-year mortgage
- Myth #10: It’s cheaper to rent a home vs owning a home
- Myth #11: Principal and interest are all that matter
- Myth #12: Paying off a mortgage as quickly as possible is always best
- Myth #13: Bankruptcy, judgments, or collections prevent you from getting a mortgage
- Myth #14: The mortgage process is difficult and stressful
- 8 Home Buying Myths You Need to Move Past
- 1. You need to make a 20% down payment
- 2. It’s cheaper to rent than own
- 3. Interest rates are on the rise
- 4. You have to pay your student loans first
- 5. Your credit score needs to be perfect
- 6. All lenders are the same
- 7. The listing price is just a suggestion
- 8. Fall and winter are bad times to buy
- Learn more
- News Room
- Busted!You have options
- Busted!Don’t let debt fool you
- Busted!You are more than your credit score
- Busted!Pre-qualification does not equal “I got the loan.”
- Busted!This may be negotiated
- Myths busted
6 First-time Homebuyer Myths
If you’re in the process of buying a home for the first time, you probably have some questions about the best way to find and finance your dream home. At Better Mortgage, our goal is to make sure you have the education and support you need – that starts with dispelling some common myths about mortgages and homebuying.
See how much you can afford
You shouldn’t put less than 20% down
It’s true that a down payment above 20% means you won’t need to pay for private mortgage insurance (PMI).
That said, for borrowers with great credit and a steady income, putting less than 20% down can be a financially sound option, allowing you to start investing and building equity sooner.
In fact, 72% of Better Mortgage buyers put less than 20% down on their homes. At Better Mortgage, we offer low down payment options starting with as little as 3% down. Read more about when a 3-5% down payment isn’t a risk.
You can’t get a mortgage if you have student loans
Haven’t been able to save for a down payment because you’ve been paying off student loans? Don’t write off homeownership just yet. The other important thing to remember is how lenders view debt.
Lenders won’t look at how much your total student debt is, but how much you pay each month towards those loans and how your monthly debt compares to your monthly income.
This article has more tips on getting a mortgage with student loans.
You should avoid adjustable-rate mortgages (ARMs)
After the 2008 housing crisis, many buyers were wary of adjustable-rate mortgages (ARMs).
But if you’re planning on selling (or refinancing) your home within 10 years, opting for an ARM instead of a fixed-rate mortgage could save you thousands. It’s more common than you may think.
According to the National Association of Realtors, homeowners age 37 years and younger sell their homes after an average of six years.1 Read more about the pros and cons of ARMs here.
You won’t qualify for any savings programs
At Better Mortgage, one in four of our borrowers is eligible for an affordable lending discount2 – and that number is growing every day. The federal government and other government-sponsored entities Fannie Mae have created a variety of affordable lending options.
At Better, we offer access to a few mortgage discounts. The first are Fannie Mae’s HomeReady loan and an FHA loan. (Read more about the pros and cons of both options.
We generally recommend a HomeReady loan if your credit score is at least 620, since it offers the option to cancel mortgage insurance once your home equity reaches 20%.) There's also a loan discount subsidized by banks in your community.
These programs allow you to qualify for more attractive mortgage pricing. Eligibility may be your location, the way you earn, the median income in the area where your home is, or your first-time homebuyer status.
Your pre-approval is good for any home
Even if you’ve been pre-approved to buy a home at a certain price, the specific property itself can impact how much you’ll ultimately be able to borrow, as well as the final cost.
For example, the cost and terms of your mortgage can be affected by things property type (condos and townhomes may have higher rates than single family units), property tax rates, and homeowners association fees.
And if a bidding war takes your offer even slightly over the area’s jumbo loan limit set by the federal government, your loan may come with different rates and eligibility requirements. This article breaks down all the ways a specific property could affect your mortgage.
Your friends or family know the best agent
Especially in a hot housing market, working with an experienced real estate agent is key. We suggest interviewing at least a few agents before making a final decision.
Read online reviews, ask to talk to past clients, and most importantly, ask if the agent has recently closed on properties similar to what you’re looking for in terms of both price range and location. You’ll also want to check for a personality fit, too.
Do you want someone who is patient and will guide you through the process? Or do you want someone who works fast and is straight to the point? Go with an agent that will suit your shopping style.
Need help finding the right real estate agent? While there is no obligation to use our suggested agents, we can help you save time and energy by introducing you to one who has been vetted by our team. Every agent we suggest has a strong track record of success in your area. Schedule a free consultation to learn more.
© 2021 Better Holdco, Inc. and/or its affiliates. Better is a family of companies. Better Mortgage Corporation provides home loans; Better Real Estate, LLC provides real estate services; Better Cover, LLC provides homeowners insurance policies; and Better Settlement Services provides title insurance services. All rights reserved.
Home lending products offered by Better Mortgage Corporation. Better Mortgage Corporation is a direct lender. NMLS #330511. 3 World Trade Center, 175 Greenwich Street, 59th Floor, New York, NY 10007. Loans made or arranged pursuant to a California Finance Lenders Law License. Not available in all states. Equal Housing Lender. NMLS Consumer Access
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Products not available in all states.
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First-time homebuyer myths debunked – Movement Mortgage Blog
There are a lot of mortgage misconceptions out there. And we want to make sure you’re as prepared as possible; so we put together a series of Mortgage Minutes to help you get educated. Read on to find out the truth about some of the biggest first-time homebuyer myths.
First-time homebuyer myth #1:
Sometimes it’s true and providing a 20% down payment does have its benefits. However, you don’t always need to have that much to buy a home. There are several loan options that require a lot less for a down payment, 3.5%. And there are even some loan types that are as low as zero percent down. Yes, zero percent down on a mortgage. Check in with a loan officer to see what you actually qualify for
14 Myths About Home Mortgages
Pardon the play on words but there really is a lot of myth-information out there about home mortgages. Purchasing your home is one of the largest and most expensive investments you will ever make. Let’s separate fact and fiction when it comes to obtaining financing for the home of your dreams.
Myth #1: Pre-qualified means the same thing as pre-approved
Fact: While the phrases sound similar, they are different. A pre-qualification is an estimate of how much money you may be approved to borrow for a home loan; you do not have to provide financial proof of income and debt.
Pre-approval means you’ve supplied financial information such as credit, employment, and income, and the lender has verified this information and given you a letter stating your approved loan amount.
A pre-qualification helps provide a basic idea of what you may be qualified to borrow as you begin searching for your dream home.
CIS’s pre-qualification process helps you understand how much you may be qualified to borrow for the home of your dreams.
Myth #2: Getting pre-approved guarantees you will get a home loan
Fact: There are lots of reasons why mortgages can be denied even after someone has been approved for a mortgage.
Changing jobs, adding additional debt, and not having enough money to cover the costs of getting the mortgage are some of the most common.
If you are pre-approved for a home loan and are thinking about making a financial change, first check with your mortgage professional to be sure your decision doesn’t sabotage the pre-approval.
Once you are pre-approved for a mortgage, always consult with your mortgage professional before making any financial changes.
Myth #3: If you are denied a mortgage once, you will never be able to get a mortgage
Fact: If you get turned down for a mortgage, don’t panic. Paying off debts, paying bills on time, and improving credit scores can help you move from “no” to “yes” the next time you apply.
If at first you don’t succeed, pay off debts, pay bills on time, improve your credit score, and try, try again!
Myth #4: In order to qualify for a mortgage, you need to put at least 20 percent down
Fact: Many first-time homebuyers erroneously believe they have to have 20 percent of the home’s purchase price saved. While a down payment of 20 percent or more can help lower your monthly payment, it’s not a requirement. Ask your CIS Home Loan representative about low down payment options and which one might be right for you.
You do not have to cough up a 20 percent down payment in order to be approved for a home mortgage loan.
Myth #5: You need an excellent credit score to get a mortgage
Fact: The average FICO score in America is 695. For a conventional home loan that’s backed by Fannie Mae or Freddie Mac, the minimum score required is 620. The lowest credit score to buy a house with an FHA loan is 580. If you have a lower credit score and need help, contact a CIS Home Loan representative to discuss ways you can improve your credit score.
Perfect credit is not needed to get a mortgage and low credit scores can be improved.
Myth #6: FHA home loans are for borrowers with no money and poor credit
Fact: Popular among first-time home buyers, an FHA home loan is insured by the Federal Housing Administration.
FHA loans are a great option for borrowers who don’t have a significant down payment and lower credit, but other borrowers may want to take advantage of an FHA loan because the interest rate is often the lowest available.
Talk to a CIS Home Loan representative about the pros and cons of an FHA loan to determine if this option is best for you.
FHA loans offer lower interest rates and small down payments for all home buyers.
Myth #7: Only income determines how much you can borrow
Fact: While how much income a potential borrower makes is important, other factors such as student loan debt, credit scores, and down payment percentage can impact how much a home buyer can borrow. Talk to a CIS Home Loan representative about your unique financial situation to come up with a realistic amount before you start shopping for a home.
In addition to income, other factors such as student loan debt, credit scores, and down payment influence how much you can borrow for a home.
Myth #8: Mortgage rates are the same no matter where you go
Fact: It’s important to shop around because all mortgage rates are NOT the same. Closing costs and other fees can vary from one mortgage lender to another. And a lower rate can make a big difference on your monthly payment. Contact a CIS Home Loan representative to discuss our latest mortgage rates.
All mortgage rates are not created equal. A lower mortgage rate = a lower monthly payment.
Myth #9: It’s always best to get a 30-year mortgage
Fact: While the monthly payment will be higher on a shorter-term mortgage—such as15 years—the total amount of interest paid is significantly lower. In addition, equity grows faster with a shorter-term mortgage.
While 30-year mortgages are great for borrowers who haven’t saved a lot of money for a down payment or don’t have a lot of reserve money available, it’s not always best for everyone.
Talk to your CIS Home Loan representative today to see which option is best for you.
If you can afford to do so, there are financial benefits to taking out a shorter-term mortgage.
Myth #10: It’s cheaper to rent a home vs owning a home
Fact: At face value, buying a home for $180,000 can seem daunting. And while it’s true that a monthly rent payment can be less than a monthly mortgage payment, it’s also important to remember these key points:
- Owning a home builds equity; you have something to show for your payments. Renting is watching water run through a sieve.
- Rent payments can increase each year; mortgages can have fixed payments
- Owning a home can include tax benefits
While seemingly cheaper in the beginning, renting can be costlier in the long run.
Myth #11: Principal and interest are all that matter
Fact: Believing that only your borrowing amount and interest rate determine your monthly mortgage-related payments can get you into trouble.
Things property taxes and homeowner’s insurance can add several hundred dollars to your overall monthly expenditure for a home.
A CIS Home Loan representative can help you identify and calculate these sometimes forgotten-about expenses so you’re not caught short each month.
Be sure to factor in all expenses when buying a home.
Myth #12: Paying off a mortgage as quickly as possible is always best
Fact: No one enjoys being in debt. And while a mortgage is one of the top debts someone can have, there are times when paying off another debt first might be the smarter option.
One example is paying off a loan with the highest interest rate. If you have a personal loan at a 10 percent interest rate and a mortgage loan at a 3.
5 percent rate, it makes more sense to pay off the personal loan first.
Paying off loans with higher interest rates first can be a better financial strategy than paying off a mortgage at a lower interest rate.
Myth #13: Bankruptcy, judgments, or collections prevent you from getting a mortgage
Fact: It is true that a minimum number of years have to pass before you can secure a mortgage after declaring a Chapter 7 or 11 bankruptcy. But if you have a bankruptcy or judgment, talk with a CIS Home Loan representative about the steps you may be able to take to secure future financing.
There are steps you may be able to take to secure future financing after going through bankruptcy, judgments, or collections.
Myth #14: The mortgage process is difficult and stressful
Fact: The mortgage process is as easy or as difficult as the lender you select. The CIS mortgage team prides itself on making the mortgage process simple as possible for each borrower. We will walk you through each step, making sure we answer and address all of your unique mortgage-related questions and issues. Let’s get the conversation started today! Contact us.
Ready to make the step toward homeownership? CIS Home Loans, a full-service mortgage bank, has served homeowners since 1991.
The personal relationships we form during the loan process are as important as the loan itself. It’s why Character, Integrity, and Service make up CIS Home Loans’ name. For more information, click here.
You can also follow us on , get pre-qualified, or apply for a loan today.
8 Home Buying Myths You Need to Move Past
Buying a home is expensive. Now isn't a good time to buy. Maybe there’s some truth to these scary home buying myths. Or, maybe they’re voices in your head discouraging you from what's possible. Either way, there are home buying myths people relate to when maybe they shouldn’t.
Move past these eight home buying myths and start seeing just how affordable homeownership is!
1. You need to make a 20% down payment
No, you do not have to make a 20% down payment. Times have changed, and there are loan programs designed with first-time home buyers in mind. Even if you are ready to make a large down payment, it still may be in your best interest to weigh all options.
- Apply for down payment assistance. Check with state and local agencies. They can offer grants or loans. And, you don’t have to be a first-time home buyer to qualify!
- Use gift money. Just as it sounds, it's money you receive as a gift. Be sure to properly document gift money through financial records. You'll need to provide copies of your recent bank statements, your donor’s recent bank statements, and cashier’s checks.
- Go with mortgage insurance. Mortgage insurance can increase your purchase power and allow you to keep your hard-earned money in savings. Plus if you choose a loan program with private mortgage insurance, it can be canceled once you reach a certain loan-to-value (LTV).
Home buying fact: A down payment may seem the only way to get a competitive interest rate or low monthly payment, but it’s not.
Things credit history, income, and debt affect your loan program (and ultimately payments), too. Find success by calculating how much you can afford. Better yet, speak with a dedicated mortgage consultant.
This way your needs are top of mind, and there’s no pressure.
2. It’s cheaper to rent than own
There may be some truth to this in the short term, but if you plan on renting for a couple years or more — it’s in your best interest to look into a home purchase. That’s because mortgage payments are stable (when you choose a fixed-rate), whereas rent can rise annually.
According to data from RENTCafe, the national average rent reached $1,430 in March 2019. It’s an increase of 3.2% year over year.
So, before you write off becoming a homeowner, do your research. You may be surprised by the results you receive from a rent vs. buy calculator.
Let’s consider Austin using data from the rent vs. buy calculator above. If you buy a home in Austin (after three years), that home will have $138,525 in equity (available to you when you sell).
However, if you rent and invest your down payment; at a 6% return rate, it will earn around $13,491 in 3 years.
Meaning, you just gave up over $100,000 that could have been part of your personal wealth!
Home buying fact: renting doesn't offer a lot of cost savings. Why not invest in something that can increase your wealth? There are many first-time home buyer assistance programs available to get you started.
You can also chat with a mortgage lender about when to rent vs. buy a home.
3. Interest rates are on the rise
The news often reports about “interest rates on the rise.” But what you need to ask is: on the rise from what? Talk to any housing economist about mortgage rates, and you’ll hear they’ve been abnormally low since the housing crash.
A NerdWallet article from February of 2018 published a quote from Dean Baker, senior economist and co-founder of the Center for Economic and Policy Research. Baker said, “I remember in the mid-’90s, getting a 7% rate, being happy with that. The rates we’re looking at today are still, by any measure, pretty low. So it’s basically the economy getting back closer to normal.”
Home buying fact: current rates may rise or fall for a variety of reasons, but not by much. If your finances are in order and you’ve found a home you love, don’t wait long for a lower rate.
4. You have to pay your student loans first
There's no question that millennials have unique financial preferences. A 2017 National Association of Realtors (NAR) study stated that 80% of millennials do not own a home. Of those, 83% say it’s because student loan debt is holding them back.
It’s true that millennials face a higher student loan burden than any generation before them. However, there are new guidelines that make it easier to qualify for a mortgage with student loans.
That’s because Fannie Mae — the largest purchaser of residential mortgages in the U.S. — has changed the underwriting rules around student loans to make qualifying for a mortgage easier.*
Say your parents or employer are paying your student loans. That debt can be excluded from your debt-to-income (DTI) ratio.
Maybe you’re on an income-driven repayment plan. Prior to this change, lenders would calculate 1% of your loan balance. But now, they can use your existing payment, as long as it isn’t zero. This could be the difference between mortgage approval and denial.
Home buying fact: having student loan debt could be in your favor. It may improve your DTI, so you qualify for a better loan program or interest rate. Though it may seem overwhelming to add on any more debt, you have to remember your home will build equity. That equity can eventually be used to pay off high-interest debts student loans, personal loans, or credit card debt.
*New guidelines mentioned above are specific to Fannie Mae programs and do not apply to FHA, VA, CHFA loans, etc. Be sure to consult with a loan officer or mortgage consultant to learn more about student loan debt and DTI ratio as they relate to mortgage approval with your specific loan program.
5. Your credit score needs to be perfect
Your credit score does not have to be perfect to buy a home. Though keep in mind, If your credit score needs work to buy a home, chances are it needs work to rent a home.
According to a Rent Cafe study, the average credit score for renters in San Francisco was 724. Those rejected from renting had a 611 score. Boston is even tougher, with an average approved score of 737 and an average rejected score of 667. Now compare this with what it takes to buy a home. FHA loans allow credit scores as low as 600 and down payments as low as 3.5%.*
*NOTE: FHA, VA, Conventional, and USDA loan requirements are subject to change. Jumbo and non-QM loans may be temporarily unavailable. As a result of COVID-19, mortgage investors are unable to support as many loans, meaning underwriting guidelines for government and conventional loans are becoming more strict.
Home buying fact: poor credit challenges both renters and homeowners a. Work on strengthening your credit.
When you feel it’s getting healthier, consult with a lender that doesn’t pay its employees a commission. That way, you’re getting guidance into the right loan program.
And, you’re living in a place of your home — so you don’t have that annual competition you may experience when renting.
6. All lenders are the same
Rates and fees vary the lender. Some charge upfront fees, others don’t. Some pay their employees a commission (resulting in an added cost to you), while others don’t. Do your research. You may even find that some lenders have access to down payment assistance or local loan programs that can provide thousands in savings.
Home buying fact: The best lender is going to take the time to get to know you. They will take your financial needs and goals into consideration. We recommend researching your options and making time to ask your lender specific questions before moving forward.
Learn the difference between Mortgage Brokers (vs) Direct Lenders
7. The listing price is just a suggestion
In highly competitive markets, don’t set your heart on a home that is on budget or above budget. Sometimes, you need to offer more than the asking price to compete. If you’re looking in Seattle or Denver, and your budget is $450,000, you may need to start looking at $400,000 homes and see where it takes you.
Home buying fact: Real estate agents know their markets. A good real estate agent can help you stay within budget and guide you through making the right offer.
8. Fall and winter are bad times to buy
Many people think that spring is the best time of year to buy, but the reality is — too many buyers competing for limited housing can drive up prices. Score a better deal by buying during the off-season.
According to MarketWatch, inventory for starter homes peaks in October. More inventory means less competition, and therefore more time to do inspections and consider the home before putting an offer on it.
Home buying fact: You face less competition in the fall, and you may be able to move more quickly because sellers are looking to close the deal fast.
You’re off to a great start now that you’ve dispelled these home buying myths. Take the next step by calling American Financing. We can walk you through loan programs and can help you get mortgage pre-approval, which will give you a clear idea of how much mortgage you can afford.
Stop renting, and get started on your path to homeownership today!
The many myths that surround the home buying process don’t make the process any easier. Believing them to be true could keep someone from buying their first home or the home of their dreams, so we felt it was important to address these myths and bust them!
Busted! You have options
Before letting that 20% down figure talk you making an offer on a home, know that there are home loans that allow you to put down as little as 3% and in some cases 0%.
0%-down loan programs are available for first-time homebuyers, Veterans, or those that qualify for the USDA program. In 2017, the majority of first-time homebuyers made a down payment of 0-6%, according to the November 2017 REALTORS® Confidence Index Survey.
Numerica offers a number of home loans to help you get the house you want!
Busted! Don’t let debt fool you
In 2018, 26% of all homebuyers had a student loan, according to the Home Buyer and Seller Generational Trends Report. Other debts auto loans and health care costs also factored into the decision making.
From student loans to credit cards, everyone has some degree of debt. Rather than letting your debt negatively affect your home buying decisions, know that accruing debt and showing the trustworthiness to pay it back is a crucial element of your credit score.
The bigger issue is to make sure your debt-to-income ratio is not too high. What is debt-to-income ratio? Take all of your monthly debt payments and divide the total by your gross monthly income. The ratio is shown as a percentage, and lenders use it to determine how well you manage monthly debts — and if you can afford to repay a loan.
Before assuming that your debt will prohibit you from buying a house, meet with your lender or call one of the Numerica Home Loan Team Members to find out what your options are.
Once you know if you are in a good position to qualify for a home loan, keep in mind that a good rule of thumb is to keep your monthly house payment around one third of your income.
Busted! You are more than your credit score
It’s true, your credit score factors into getting a better mortgage rate. However, even those with bruised credit could qualify for a home loan. Your credit score is part of your story, but it’s not all of you.
There are home loan options for people with credit scores between 600 and above. Moreover, each lender has their own criteria for approval, and while it is true that your interest may be higher if your credit score is lower, you may still be approved.
Talk with your lender and find your loan options. Remember, Numerica is committed to serving people and not credit scores. Numerica looks at your entire financial picture when approving you for your home loan.
Busted! Pre-qualification does not equal “I got the loan.”
While these two terms sound a, they are different steps in the home buying process. Pre-qualification is the beginning conversation to determine what kind of loan you might be eligible for as well as an estimate of your budget. You walk away from pre-qualification with an understanding of how much money your loan may be approved for.
To pre-qualify, you provide your income, debt, and assets, which your lender looks at to determine your possible loan amount. It is not in-depth and does NOT consider your credit score. After pre-qualification, you and your lender can then look into the types of loans that will suit your financial situation.
Pre-approval requires a mortgage application, and your lender does a thorough review of your credit history and financial life to date. It will give you an idea of the amount you are able to borrow and the interest rate at which you could borrow that money.
Busted! This may be negotiated
Closing costs are fees in addition to the price of your new home. They can include:
- Title insurance
- Lender costs
- Homeowner’s insurance
- Legal fees
- Lender’s fees
In many situations, the homebuyer actually pays the closing costs and the seller pays a portion of the title insurance and escrow or closing fee. That said, there are times when the buyer pays both of those.
In almost all cases, closing costs can be negotiated depending on the type of loan. With conventional loans, buyers may be able to negotiate with the home seller to have the seller pay up to 3% of the sales price, which would go towards closing costs. On FHA loans, that percentage may be increased to 6%.
When you’re looking at the purchase of your new home, please keep in mind that closing costs can total between 2-5% of the purchase price. These costs are typically added to your down payment amount, and all funds are due at time of closing.
Now that we’ve busted some of the top home buying myths, you might feel a little more curious about buying a house yourself. If you are, we suggest connecting with one of our Home Loan Team Members.
They will take the time to find out what loans might work best for you and find out how much you could pre-qualify for.
This will help you make an educated decision about one of the largest and most rewarding purchases of your life.
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