Purchasing a home is one of the biggest decisions we can take. For one, it is the single largest purchase for most and most people live in the house for a long period.
All Mortgages Are the Same
This myth has two different sides to it. Firstly, to clear up the air, there are two main types of mortgages available on the market today. There are fixed interest rate mortgages where the rate doesn’t change and then there are those loans where the rate can change based upon certain factors. Even within these two categories, not all loans are the same. The closing cost i.e. the money that the buyer must take out at closing varies across lenders offering the same rate.
Pre-Approves Vs. Pre-Qualified
Many homeowners think that being pre-qualified is the same as pre-approved. However, they are dead wrong.
Pre-qualifying is an informal process of getting an estimate of how much the lender will approve you for. You provide information and documents to a mortgage lender and they estimate how much you can be loaned without scrutinizing your information too diligently.
Pre-approval, on the other hand, is a more diligent process. The lender has verified your information and checked your credit. The mortgage lender then gives a commitment to loan you a certain amount. Pre-approval is a distinguishing factor from other buyers in a hot seller’s market.
A Large Down Payment Is Required
Many potential homeowners miss out on opportunities simply because they think that their dream house will require a 10% or 20% down payment. That is not necessarily the case as even some FHA backed loans just require a 3.5% down payment on the total value of the home. In addition, if you have good credit there are a lot of avenues for you to explore in regards to mortgage options.
Most people take so much time while looking for the perfect home that they don’t do the proper research on mortgage. Clearing up misconceptions related to mortgages can open up new avenues and might just make that dream house more affordable.