When it comes to getting a mortgage, there’s no shortage of myths and misconceptions that can mislead potential homebuyers. Let’s break down some of the most common mortgage myths and set the record straight.

Myth #1: You Need a 20% Down Payment to Buy a Home

While a 20% down payment can help you avoid private mortgage insurance (PMI), it’s not a requirement. Many loan programs, such as FHA loans, allow for down payments as low as 3.5%, and conventional loans can go as low as 3% for qualified buyers. Veterans and active-duty military members may even qualify for VA loans with zero down payment.

Myth #2: Your Credit Must Be Perfect

Having excellent credit can certainly help you secure better interest rates, but it’s not a dealbreaker if your score isn’t perfect. Many lenders offer loan programs for buyers with credit scores as low as 580, and some may even consider lower scores with compensating factors like a higher down payment or steady income.

Myth #3: You Should Always Choose a 30-Year Fixed-Rate Mortgage

While 30-year fixed-rate mortgages are popular, they’re not the only option. Depending on your financial situation and goals, a 15-year mortgage, adjustable-rate mortgage (ARM), or other loan type might be a better fit. Shorter loan terms often come with lower interest rates and help you build equity faster.

Myth #4: Getting Pre-Approved Hurts Your Credit Score

A pre-approval requires a hard credit inquiry, but the impact is usually minimal. In fact, multiple mortgage inquiries within a short period (typically 30-45 days) are often treated as a single inquiry for scoring purposes. Plus, getting pre-approved shows sellers you’re a serious buyer.

Myth #5: If You’re Denied by One Lender, You Can’t Get a Mortgage

Different lenders have different guidelines and risk tolerances. If one lender denies your application, another may approve it. It’s always worth shopping around and consulting a mortgage broker to explore various options.

Myth #6: You Can’t Get a Mortgage If You’re Self-Employed

Self-employed individuals may face additional documentation requirements, but they can absolutely qualify for a mortgage. Providing at least two years of tax returns, bank statements, and proof of steady income can help demonstrate financial stability to lenders.

Myth #7: The Lowest Interest Rate is Always the Best Option

While a lower interest rate is appealing, it’s not the only factor to consider. Closing costs, loan terms, and overall fees can impact the total cost of the mortgage. Sometimes a slightly higher rate with lower fees may be the better financial choice.

Myth #8: Recent College Graduates Can’t Qualify for a Mortgage

Many recent college graduates assume they need years of work experience before qualifying for a mortgage, but this isn’t always the case. Lenders often consider factors like a job offer letter, steady income potential, and good credit history. Some loan programs even allow student loans to be factored into the debt-to-income ratio more leniently, making homeownership attainable sooner than many think.

Takeaway

Understanding the truth behind these common mortgage myths can empower you to make informed decisions and approach the home-buying process with confidence. Whether you’re a first-time buyer or looking to refinance, speaking with a knowledgeable mortgage professional can help you navigate your options and secure the best loan for your situation.

Any questions? Let us know in the comments! We want to help you succeed in your home buying journey. Feel free to contact us at any time!

205.358.3423 | [email protected] NMLS#2662452