The mortgage process can be mystifying, especially for people who have never done it before. Buying a home is a significant decision and a huge investment that should be based on facts rather than misconceptions. Unfortunately, some of these myths have discouraged people from applying for home loans.
You might have heard or read things that are not true about mortgages. The mortgage industry is cluttered with a lot of information, where some can be misleading. Consequently, it is essential to have all the facts right so that you can make an informed decision.
Pre-approval vs. pre-qualification
Pre-approval and pre-qualification might sound similar, but they are different. Mortgage pre-qualification is informal. You get pre-qualified as soon as you speak to the lender and answer questions regarding your financial situation. The mortgage company uses this process to assess the amount of money that you qualify for and the repayment period. Pre-approval is, however, a more thorough process as compared to pre-qualification. Before you are pre-approved, the lender checks all your credit and verifies your income and assets. The financial assessment informs the decision on how much should be awarded to you. Your information is then submitted to an underwriter for official approval.
You need to make a 20% down payment
In the past, making a 20% down payment was a standard requirement. In today’s mortgage market, loans require as little as 6%. FHA loans only need a 3.5% down payment. The Veteran’s Administration (VA) loan programs do not require down payment at all. Additionally, other available grants and programs can help you to raise cash. You should talk to your mortgage company in Salt Lake City to explore the plans available in your area.
Your credit score should be perfect
You do not need a spotless credit score to get a house. If your credit score is not good enough for conventional loans, you can explore other options like having a co-signer or making a substantial down payment that will reassure your lender. Keep in mind that your score also determines your loan interest rate. You will save money eventually by making sure that your credit score is in good shape before you buy a house.
A down payment is the sole upfront cost
The down payment takes up a considerable chunk of the upfront expenses, but it is not the only expense that you should consider. Closing costs, which are shared between the seller and the buyer, also form part of the upfront payments. These costs cater for charges used to facilitate the transaction and often add up to a maximum of 2% of the home sale price. If you do not have money to cater for the closing costs, you can ask the seller to pay up for you. In that case, your portion will be rolled over to your mortgage.
Now that you have debunked the myths surrounding mortgages, you can make an informed decision. You are guaranteed to save a considerable amount of money and find a mortgage that suits your needs and preferences. Also, do not forget to consult a mortgage expert for guidance when applying for a home loan.