Debunking Top Four Mortgage Myths

Debunking mortgage myths is crucial for aspiring homebuyers as they navigate the complex world of home buying. Myths surrounding mortgages can lead to misinformation and poor decision making, so CCCU is here to debunk them in order to help you buy your dream home.

Myth #1: You are required to make a 20% down payment

Many first-time homebuyers believe that putting a 20% downpayment is a requirement. It is true that many financial experts recommend 20% to avoid paying private mortgage insurance (PMI) but there are specific mortgage loans available that require little to or no down payment. If you’re a first-time homebuyer, make sure to reach out to your local financial institution to learn about their downpayment programs or loan options.

Myth #2: A downpayment covers your closing costs

Before you even begin the homebuying process, it’s crucial to understand that a downpayment doesn’t cover your closing costs. The down payment is a percentage of your home’s purchase that you pay upfront while the closing costs are fees associated with finalizing the sale of your home. These costs are appraisal fees, inspection fees, title fees and other charges that must be paid to close your home.

Your local real estate agent and lender can help you identify the closing costs so you can budget accordingly and have a smooth final homebuying process.  

Myth #3: You need a perfect credit score to get a mortgage

While having a good credit score is certainly helpful, this is not the only factor that lenders look at in your mortgage application. Your income, employment history, and debt-to-income ratio (DTI) are some of the key factors they also consider. Most home buyers think the ideal credit score when buying a home is 740 or above but it’s not always the case. Some mortgage loans are available to applicants with a credit score of at least 620.

Myth #4: Prequalification and preapproval work the same

When you’re looking to buy a home, you might often see the two terms prequalified and preapproved used by realtors and lenders. While some might think they refer to the same thing, there are a few differences. Both involve a lender pulling a credit report and reviewing financials, but the difference is an underwriter reviews the file on a preapproval and issues a conditional approval for a dollar amount.

A preapproval is a more in-depth review of your finances and credit history and results in a document from your lender that shows an estimated loan amount they are willing to lend you. Being prequalified can give you an idea of the price range of home you should be looking for, but the preapproval carries more weight.

If you’re new to the housing market, hearing all kinds of mortgage myths may complicate your homebuying process. Working with a professional mortgage loan officer can help debunk those mortgage myths. Remember, understanding the truth behind these mortgage myths is essential for getting your best mortgage possible. At CCCU, we are committed to helping our members get into their dream homes. For more information about our mortgage loans, visit www.CCCULV.org or call us at 702-228-2228.