Don’t Let These 5 Common Mortgage Myths Fool You

The real estate market is hot. A combination of high demand and record low interest rates has fueled the housing market, even amidst a pandemic. But with so much going on in the mortgage industry, it’s important for buyers to stay informed. This includes being able to determine fact from fiction. That’s why we’ve compiled this list of five common mortgage myths so that you aren’t fooled during your home search.

 

Myth #1 — All buyers will get a low interest rate

Every day we’re hearing stories about record low interest rates on mortgages. And you may be inclined to think that everyone will score a great deal. Unfortunately, that is a myth. There are many things that factor into your interest rates. This includes your credit score, the kind of loan you’re applying for, the type of home you’re buying, and how big (or small) your down payment is. Only those buyers with excellent credit scores and large down payments will qualify for the best terms.
 

Myth #2 — Everyone should refinance

If interest rates are so low, then all homeowners should refinance, right? Wrong. That is also a myth. Not all homeowners will see savings if they refinance. Remember, you’ll incur closing costs for your new home loan. This could be as much as six percent of the amount of the loan. Unless you’re planning to stay in your home for a long time, the upfront costs cancel out the long-term savings. And if you already have a great rate on your mortgage, it may not be worth the time and energy involved in applying for a new loan.

 

Myth #3 — Everybody can get a home loan

Gone are the days when anybody could get a mortgage no matter their financial situation. Easy lending helped lead us to the Great Recession, and lenders have tightened their restrictions since then. High levels of unemployment and an economic downturn have also made lenders nervous. You’re more likely to qualify for a home loan if you have good credit and a sizable down payment. 

 

Myth #4 — It’s not necessary to get pre-approved for a mortgage

Wrong! Even in the best of times, it’s important to get pre-approved for a home loan. But during a pandemic, it’s absolutely critical. Sellers want to know you’ll make it to the closing table without any financial troubles. Getting pre-approved shows the seller you’re serious and that you can afford the home. In addition, it’s a sellers’ market and many homes are getting multiple offers. Your offer won’t be taken seriously without a pre-approval letter.

 

Myth #5 — Forbearance gets you out of making payments for good

While we’d love to tell you that mortgage forbearance is the end to all your financial woes, it just isn’t’ true. Forbearance gives you a break from making payments for a few months. But you’re still on the hook for that money. Depending on your lender, you’ll either pay it back in a lump sum at the end of the forbearance period or it’ll be tacked on to the end of your loan.

 

Contact the experts at Agent inc.

Are you worried about being able to tell fact from fiction during your home search? Then work with the experts at Agent inc. We can help you through the real estate process from beginning to end, answer your questions, and ease your worries. Contact us today at 949-791-8160 or [email protected] to get started on your path to homeownership!