Common Mortgage Misconceptions – First Time Home Buyers
Common Mortgage Misconceptions – First Time Home Buyers
First-time homebuyers often have preconceived notions about how much of a down payment they need to put down. According to NerdWallet, 44% of respondents said not having a down payment was the primary thing preventing them from becoming homebuyers.
And down payments are not the only thing they have misconceptions about, here are some common myths that first-time homebuyers often have:
Myth: You Need to Put at Least 20% Down
Having at least a 20% down payment is a common hurdle that prevents or delays homebuyers from going through the process of applying for a mortgage. While it’s true that the more a homebuyer can put down the better – 20% is not mandatory and they should look at how different down payments will affect their mortgage payments. Homebuyers should also take into consideration things like interest rates and PMI while determining the amount they should put down.
Myth: Down Payments Impact Interest Rates
First-time homebuyers may think that the more they’re able to put down, the lower their interest rate will be but down payments have no impact on interest rates. They should instead look at different lenders to find a good interest rate. They should also take the time to check their credit score as this is one of the factors lenders look at when determining how much of a payment they need to put down.
Myth: You Should Target Homes at the Top of Your Price Range
If a homebuyer gets pre-approved for a $400,000 loan from their mortgage lender, they may think that they should only look at home listings at that price. However, homebuyers need to consider other things such as property taxes, HOA dues, and ongoing maintenance and upkeep before settling on a price range. There are often additional costs that first-time home buyers may not be aware of so they should look for homes at a price range that will still allow them to keep up with their mortgage payments.
Myth: Only People with High Incomes can Afford a Home
People with modest incomes shouldn’t be discouraged from trying to obtain a loan to purchase a home. There are several programs available to first-time homebuyers including VA loans for people who have served in the military or USDA loans for people who live in rural areas. Many first-time homebuyers may qualify for down payment programs or grants even if they are not considered low-income.
