5 Fake News Theories that Stop Home Buyers from Getting a Mortgage
There are many home buyers who will need to use a mortgage to make their first house purchase or even their second or third. Mortgages are there to help people get into their next home without the home buyer needing to have the cash available in full. And while getting a mortgage may feel intimidating, it is much easier than most people assume. Everyone has their own theories about mortgages but here are five that are not actually true.
Must Have 20% Down
This is the number one thing that people hear and think about mortgages. In the past, having twenty percent to put towards a down payment was something banks looked for. It is a great starting point for a home buyer and it does show the bank they are able to save a significant chunk of money. However, this is not required.
Having a higher down payment does benefit the home buyers through better monthly payments and even better interest rates. But there are many banks and mortgages available that allow buyers to have as little as five percent. Talking to a lender about options is important if working with a smaller down payment.
Avoiding Other Lenders
Loyalty is fantastic, but banks are not handing out better mortgages to long-term customers. Gone are the days where large corporations are able to know each customer individually and are able to offer better rates simply for being loyal. Shopping around is vital is a person wants to get the best mortgage for their situation.
Importance of Credit
This is a theory that has a double-edged sword. Credit is very important when getting a mortgage. Having great or excellent credit will help home buyers by showing the lender they are ready to take on such a large loan. It can help get them better interest rates and the whole process may go a little smoother.
With that being said, bad credit does not stop someone from getting a house. Buying with bad credit will result in having a higher interest rate and higher monthly payments. Some banks do like to see a higher down payment, as well, to offset the amount of risk being taken by providing a mortgage.
Either way, start working with a lender to better the credit score and to see what options are available.
Personal Income
Even if dropping that down payment to five percent is still daunting there is hope. The down payment does not have to come directly from personal income. If there are family members willing to help, declaring part of the down payment as gift money is acceptable. A couple of lenders will even structure a loan so the down payment is a separate loan or tacked on to the mortgage.
No Boss
There are so many people that are now self-employed. Before self-employment was popular it was extremely hard to find a lender that was willing to work with someone who worked for themselves. Now lenders know that a good majority of their clients are self-employed and they have changed the ways people qualify for loans.
So long as they have a good credit score, are up to date on taxes, and have been self-employed for three years they can get a mortgage.
Getting a mortgage is not an easy task. However, home buyers should not be scared to talk to a lender. Lenders are there to help people decide when the right time to get a mortgage is and how they should do it. Even though there is a lot of advice out there for someone looking to get a mortgage each theory should be taken with a grain of salt.