Buying your first home can be an amazing experience, and it’s especially wonderful if you don’t stress too much throughout the process—a process which can actually be a lot of fun! While there are important decisions to make, such as finding the right home and settling on the loan option best suited for your situation, it’s important to remain calm and enjoy the ride. This is where Fairway of the Carolinas comes in, because you don’t have to pilot your own loan and figure out all the details; our loan officers are here to do that for you, as well as answer any questions you may have along the way.
So sit back, try to take a deep breath and remember that your Fairway lender’s job is to make everything go as smoothly as possible for you—from the moment you make your offer and your new home goes under contract, all the way to the closing table and the moment you’re handed the keys! Below, discover six common myths about mortgage loans and the mortgage industry as you unpack some important misconceptions that will help you make the right purchase and not have to sweat the process.
Myth 1: You must make a 20% down payment on the total cost to purchase a home
This belief, commonly held as it may be, is factually incorrect. You can obtain a mortgage from the Federation Housing Administration (FHA) with a down payment of as little as 3.5%, and other government-backed loans require 0% down payments. FHA loans are available to everyone—whether you’re a first-time buyer, have a less-than-ideal credit score, or both. The 20% myth originates from the private mortgage insurance (PMI) requirement from mortgage lenders. PMI protects a lender if a buyer defaults on their loan, but VA loans and USDA loans don’t require PMI. USDA and VA loans also require no down payment.
Myth 2: Your interest rate is everything
This is hardly the case. While the interest rate associated with your home loan certainly has a role to play in how much you will ultimately spend to pay off your mortgage, interest rates (which are extremely low, anyway, these days) aren’t the end all, be all. An equally important consideration is your annual percentage rate, which you can learn about on Fairway’s FAQ page. It’s also important to buy a house that you can afford and one that’s in a location that meets your needs. And don’t forget: There are numerous types of loans, which you can learn about here, and which your Fairway mortgage originator can explain in even greater detail. Choosing the right mortgage company, a trusted industry leader like Fairway, can be just as pivotal for your home purchase as the interest rate you land on.
Myth 3: I need perfect credit
Absolutely not! FHA loans are available to borrowers with a credit score as low as 580. With a 600 credit score or higher, you should be in an excellent place to qualify for a mortgage loan. And, even if your credit score is too low for you to qualify for a loan right at this moment, fear not; Fairway’s internal Creditool team can help. Just ask your loan officer about this option, and one of our highly qualified credit analysts will be assigned to your credit report and draft a credit improvement action plan just for you, free of charge. Click here to learn more.
Myth 4: You can’t get a mortgage with outstanding debt, such as student loans
Student loans or other forms of debt don’t automatically disqualify you from being approved for a home loan. In fact, people with various forms of debt both big and small qualify for mortgages all the time! The big key is having steady income and enough income to make your lender feel fairly confident that you can handle a monthly mortgage payment on top of your existing debt. And, there are always practical ways to consolidate and trim your other debts when you go to apply for a mortgage so that these debts are unlikely to cause a red flag.
Even something as simple as registering to vote (sounds crazy, right?) can give a borrower with significant debt a leg up when it comes time to apply for a home loan. And, of course, things like improving your credit score and not making significant purchases can help negate the potential impact of having debt.
Myth 5: A bank, where you have a checking account, is a better option than a mortgage company
While you might be more familiar with a bank simply because you already have a personal checking and/or savings account through that institution, a mortgage lender—like Fairway—is a better option for your homebuying needs. Unlike banks, which are responsible for many different types of loans, mortgage companies specialize in home loans. As a result, mortgage lenders tend to have more lending expertise and training, a greater variety of loan options and better loan guidance and advice when it comes time to make a home purchase.
Additionally, mortgage companies often close faster on home loans and are generally more inclined to negotiate with the buyer on the terms of the loan itself. At Fairway, you’ll find loan officers who are always willing to go the extra mile to make the homebuying experience as straightforward and easy as possible for you, our valued customer.
Myth 6: Wait until you’ve found the perfect home before you worry about financing
It’s never a good idea to put the cart before the horse when it comes to making a home purchase. It’s much better to get pre-approved for a loan—and have a pre-approval letter in hand—before you do any serious shopping. This way, you’ll not only know how much home you can afford, but you’ll be able to make a more competitive offer when you find the house that’s right for you. In this highly competitive housing market, where homes are selling like hotcakes, it’s far better to be prepared before making an offer. This will give you the best chance of being able to quickly make an offer, having that offer accepted, and ultimately being able to have the keys to your dream home in hand.
Ready to find out what you qualify for? Click here.
Make every effort not to fall for the many mortgage myths out there today. As popular as some may be, this doesn’t mean they’re true! It’s always best to do your research ahead of time, but you don’t have to be a mortgage expert (that’s our job) or have your whole life in order to start thinking about the next place you would like to live. Our dedicated mortgage professionals at Fairway of the Carolinas are here to guide you every step of the way so you will know exactly when the time is right to make a home purchase and confidently take the necessary steps to make your homeownership dreams come true.
Talk with a Fairway loan officer today about your specific needs or feel free to ask any questions in the comments section below. We’re always here for you!