One of the most expensive things you will buy in your life is a house. Since it’s such a big investment, it’s important to know everything you know about buying a home before signing any paperwork. To be as confident as possible, you need to understand and be aware of any myths. Today we will clear up any misconceptions
Myth #1: Pre-Qualified is the Same as Pre-Approved
Getting pre-qualified and getting pre-approved are both at the start of the mortgage process, but they are very different from each other. Understanding the difference between the two could be the difference in landing the house of your dreams or losing it to another buyer.
A pre-qualification is only an estimation of how much you will be approved for based on your finances. With a pre-qualification, there is no proof that you will be approved the same amount at a later time. Pre-approval is when you have an official letter stating that you have been approved for a certain loan amount. Rather than an estimate, it shows the exact amount you can afford.
Myth #2: You need an outstanding credit score.
An excellent credit score will definitely be helpful, but you don’t need a score of 850 to get a house. Thee average FICO® Score is about 695, which will get you approved without much issue. Even though a score of 640 isn’t the greatest, you can still get a mortgage.
Myth #3: Renting is less expensive than owning a home.
Compared to rent, a mortgage seems to be a lot more expensive. Yes, your monthly payment towards your rental may be less expensive, but paying a mortage has its advantages. When you own a home, you are able to build equity, which you can’t do while renting. Renting payments also increase every year while a mortgage will have fixed payments until it’s paid off. Best of all, when you own a house, you can receive tax benefits.
Myth #4: Mortgage rates are the same no matter where you go.
Not all mortgages rates are the same. Credit unions, for example, will have fewer fees compared to big banks, so you have a good chance of receiving a lower rate. Don’t be afraid to shop around for a mortgage. Your rate can really impact your monthly payment.