7 Mortgage Myths Debunked
It is no secret that the home buying process is a long and complicated one. Getting started can be intimidating and confusing, so we’ve compiled a list of common mortgage myths we hear from our clients. Here, we’ll break them down and explain the truth about mortgages, in plain English.
1. Having my credit pulled will drop my credit score
Many prospective buyers are hesitant about having their credit pulled because they fear it will destroy their score, but it has far less affect than you’d think. Having your credit pulled for any reason may have an impact on your overall score, but it is usually very minor.
Did you know, you actually have many different types of credit scores? Depending on who accesses your credit report, from which bureau, and for what purpose, a different scoring model is reported. Mortgage inquiries are treated differently than other credit inquiries because you can shop around for the best rate and terms. The credit bureaus do not penalize consumers for rate shopping, so any mortgage inquiries that happen within the same 45 days are treated as only 1 inquiry on your credit report.
2. Credit Karma says my score is…
Popular sites like Credit Karma and Free Credit Report are great tools for monitoring trends in your credit report, but are simply not reliable sources for determining credit eligibility. We’ve compared Credit Karma’s “scores” to actual scores we’ve pulled, and seen as much as a 100-point swing in either direction—whoa!
Don’t necessarily trust information you obtain from these websites—talk to a mortgage loan officer! In addition to providing you with an accurate credit rating, your loan officer can provide insight into what factors may be affecting your score, and what you can do to improve it.
3. I haven’t been at my job for 2 years yet
If you haven’t been in your current job or position for the last two years, don’t worry! As long as you have had continuous employment for the last two years, you’ll still qualify. Any gaps in employment will have to be detailed with a signed letter of explanation, but do not necessarily doom your chances of being pre-approved.
4. I need to payoff and close out my credit cards first
For some unknown reason, many of our clients believe they should have all other debts paid off before buying a home. While this is a noble idea and paying off debt is rarely—if ever—a bad idea, closing revolving accounts will actually do more harm than good! Pay off—or pay down—as many accounts as you can, but do not close out your credit cards. Having unutilized credit positively affects your credit score and your borrowing profile!
5. I don’t have the funds for a down payment
It is a common misconception that borrowers must have 20% to put down on any home that they want to purchase—not to mention closing costs—but that simply isn’t true anymore. There are many mortgage programs available today that did not exist a decade ago. For example, the FHA now offers mortgages with as little as 3.5% down, and both USDA and VA offer programs with no down payment at all!
6. Owning is more expensive than renting
It is almost always cheaper to pay a mortgage than rent a comparable home in the same area. Owning a home also allows you to build equity. When your lease ends on your apartment, you are welcome to leave, but the rent you paid is long gone. Buying a place of your own allows you to build your own wealth over time, not your landlord’s.
7. My bank will give me the best deal
Many borrowers, when thinking of purchasing a home, start with their trusted bank or credit union first. It makes sense, right? They know you, you’ve banked with them for years, they already have all of your personal information, it should be easy peasy, right? Wrong! Loan guidelines are the same for everyone, no matter which bank or lender originates the loan. Your bank won’t be able to cut you any special breaks or give you an extra low rate, just because you’ve been a member for a while—even if they want to!
Get More Information
To apply for a Mortgage or Refinance call Riverbank Finance today at 1-800-555-2098.