4 Mortgage Myths

Myth #1: You have to put down a 20% downpayment.

Many first-time homebuyers think they need to have at least 20 percent of the house’s purchase price saved up for the down payment. This is not true! Most lenders will tell you that nowadays the minimum downpayment you’d need is 3 percent of the house’s purchase price. Some loans, like a VA loan, can waive the downpayment completely.

Keep in mind that some lenders will raise your interest rates if your down payment is considered low.

Myth #2: Your credit score or debt will keep you from being approved for a home loan.

Lenders look at quite a few aspects of your finances. One of those is called a debt-to-income ratio- your gross income in a month versus your monthly debt payments. Not all debt is bad. In fact, making regular payments on any outstanding loans you may have while building your savings up establishes a credit history.

Myth #3: Everyone has a 30-year fixed-rate home loan.

It’s true that the most common type of home loan is a 30-year fixed-rate loan repaying the loan over 30 years with the same interest rate every year. This isn’t the perfect fit for everyone’s financial situation and long-term plans. There’s certainly value in knowing that your interest rate will never go up over a 30-year period. But choosing a mortgage is a highly personal decision and there are certain situations where a 30-year fixed mortgage isn’t a good fit.

Myth #4: Mortgage insurance is bad.

It is true that the lender will require you to take out mortgage insurance if your down payment is low. However, this is not necessarily a bad thing!

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