Top Mortgage Myths Debunked
Posted: May 2, 2023
It can be exciting to think about buying your first home, and we understand that you might have some questions too! We’re here to make the home loan process simple and affordable. Let’s bust some of the most common mortgage myths.
Myth 1: A 20% down payment is required to get a mortgage.
If you’ve talked to friends and family about how the mortgage process works, you might have heard that you need a 20% down payment to buy a home. That can feel pretty daunting when you’re purchasing your first home! The truth is, a large down payment isn’t always necessary to get approved for a mortgage. At Landmark, we offer loans with down payments as little as 3%.
Myth 2: It’s cheaper to rent than buy a home.
You might be worried about whether you can afford to buy a home. However, if you’re paying monthly rent, you might be able to find a comparable mortgage payment. Crunch the numbers by using our Rent vs. Buy Calculator. There are several advantages to buying a home versus renting. Some benefits of owning a home include building equity over time, tax deductions on part of your mortgage payments and predictable payments each year. Our helpful Loan Officers are here to walk you through the process of financing your first home.
Myth 3: A mortgage pre-qualification and pre-approval are the same thing.
Although they sound similar, they aren’t the same! A pre-qualification is the first step to estimate a projected loan amount that a lender makes based on information that is usually self-reported by the prospective buyer, without undergoing a credit check or financial review. With a mortgage pre-approval, a lender verifies prospective buyers’ information by reviewing documentation such as credit, income and funds to close. A pre-approval letter carries more weight than a pre-qualification letter because it shows sellers that you’re serious about buying a home, proving you have a commitment from a lender to approve a home loan. The good news is that at Landmark, pre-approvals are free!
Myth 4: A perfect credit score is needed for home loan approval.
While having a great credit score is helpful, you don’t have to have a perfect score. Your credit score is one of many factors when considering a mortgage application. Not sure what your credit score is? Landmark members can check their credit score for free through Credit Hub within Digital Banking. While we don’t have a set minimum credit score required, if you have questions about your individual situation, feel free to reach out to a Loan Officer to discuss. For more information on improving your credit score, check out these tips.
Myth 5: I won’t be approved if I have debt.
Most people have some amount of debt, whether that is due to student loans, auto loans or credit card balances. What lenders typically look at is your debt-to-income (DTI) ratio. You can figure this out by adding up your monthly debt payments and dividing them by your gross monthly income (the amount you’ve earned before taxes and deductions). If you’re unsure if your DTI is acceptable, our Loan Officers can help!
Myth 6: I should always pick a Fixed Rate Mortgage over an Adjustable Rate Mortgage (ARM).
With a fixed rate mortgage, your interest rate is set when you take out the loan and will not change. This can be helpful when you want the security of locking in a low rate. However, in certain situations, an ARM might make sense. With an ARM, you’ll have a low intro rate for a term (such as 1, 3, 5 or 7 years), and then it can fluctuate within a set range of rates over the remainder of the life of the loan. Therefore, when fixed rates are higher, you might want to take advantage of an ARM. They also could be useful if you plan to sell your home or refinance in the near future. Be aware that when rates increase, your payment will increase with an ARM. Our Loan Officers can help you find the best type of loan to meet your needs.
Myth 7: I should find a house before I worry about a mortgage.
You’ll want to have your financing lined up before you find your dream home, so you can make a strong offer right away. Otherwise, the home seller will likely choose someone who already has the funds ready to buy a home. At Landmark, our pre-approvals are valid for 90 days. So, if you plan on buying a home soon, let’s get the ball rolling!
Myth 8: My home budget should be as high as the maximum amount I qualify for.
Just because you get pre-approved for a certain amount, it doesn’t mean you have to buy a home at the top of that budget. Instead, make sure you can comfortably make your monthly mortgage payments. You can use our Mortgage Qualifier Calculator to estimate your monthly payments, depending on your loan amount, term, and down payment.
At Landmark, we’re here to help you get into your new home! We offer several perks to help first-time homebuyers, including up to $1,000 covered in closing costs.* Learn more or apply for a home loan online.