If you have talked to your friends and family about owning a home, they may have given you plenty of advice given their knowledge and experience. One of the things they will more than likely talk about is mortgage because it is through this financial product that many of us today actually own a home.
While some advice may be sound, there are many common mortgage myths thrown into the mix causing misinformation and doubt to spread. Such myths can hurt your ability to obtain the proper mortgage to secure your home.
To ensure that does not happen, read on as we tackle a few mortgage myths and show you why they are far from true:
Renting is better than buying
Many people may argue that renting is better than buying because it is much cheaper. That is partially true, where renting is a great way to obtain a place to stay. However, do realize that if you rent, you are not making an investment. You are simply giving that money away to someone else, whereas if you are buying a home, you are building equity. In many situations, it is much better to buy, simply because you have the option to sell the home and make a return on your investment later on.
Pick one with the lowest interest
It may seem tempting, and even logical, to opt for the mortgage solution with the lowest interest rate. Unfortunately, this can become a mistake. This is because there are so many other factors that add to the cost of a mortgage other than just interest.
Even seemingly small fees like closing costs, prepaid insurance, and various other expenses all add up. As such, you should be paying attention to all these costs, including the interest rates, to ensure you are getting the best deal possible. This also means that there will be some cases where you will opt for slightly higher interest rates for better deals!
Prequalification is a waste of time
Because prequalification is nothing like preapproval, many people may think that the former is just a waste of time and decide to only get preapproved for a mortgage. Unfortunately, this can end up being a severe mistake. The purpose of prequalification is to get an idea of how much you can afford to borrow. This helps to ensure you do not borrow too much or too little that can affect your purchase and finances.
There is a 20 percent down payment to cover
You may have heard time and time again about 20 percent down payments for a mortgage to avoid mortgage insurance. While it’s excellent to put down a large sum and minimize your mortgage amount, you do not actually have to pay 20 percent. There are some loans like FHA that go down to 3.5 percent or even VA that goes all the way down to zero! This means you may be able to get many deals you thought you could not get. That said, keep in mind that the lower you pay for a down payment, the higher the likelihood that you will be required to get private mortgage insurance. Note, however, that certain loans like VA loans do not require PMI if you are a veteran.
Heard any of the myths above? If so, now you know better! With all of that new knowledge in your mind, you will be much better at making the right decision to pick the perfect mortgage to purchase your dream home. That being said, do take the time to find trustworthy mortgage brokers who are willing to help you identify the perfect solution. This results in the best deals you can work with to maximize your finances and increase your chances of securing your home.
Liberty Mortgage Group is a licensed mortgage broker in Colorado, offering superior loan services to every customer to satisfy any financial needs. If you are looking for the best mortgage lenders, work with us today!