If you are in the market for a home, the loan approval process can feel somewhat like a mysterious process for you - especially if you are a first time buyer. Your focus is often on finding the home you'd like instead of worrying about the loan and it can feel challenging to know where to start. Mortgages carry a mystique about them, and misconceptions can form as a result. The sources of the misconceptions can be nearly infinite: hearsay with a neighbor, news outlets, outdated information on the internet, and numerous others. Today's post breaks down several myths of the mortgage application process.
- "To get a conventional loan, I need a 20% down payment:" This is a prevalent myth in the marketplace today, one that we frequently hear. I believe this misconception was formed years ago when it was commonplace to have 20% down, but in today's market there are programs with much lower down payment requirements. Some Federal programs, such as the VA for veterans and USDA loans for rural homes, have options for no down payment for those who qualify. Certainly, having a 20% down payment can benefit you in several ways (such as not paying mortgage insurance, or PMI), but for those building up a down payment, other programs may be currently suitable for you.
- "My credit must be flawless to apply:" While it is true that virtually all loans do have credit requirements to qualify, your credit does not have to be 800+ to qualify. Most of us don't have perfect credit, and the process to improve a score takes time. If you have good credit (with a handy guide for your review) and your income is stable, buying a home and qualifying for a mortgage may be the right decision for you; be sure and consult with a trusted real estate agent.
- "The paperwork process for a mortgage is extreme:" Before electronic signatures and secure document uploads were in place, it's true that the paperwork involved to apply for a mortgage was significant. In today's digital world, much of the process has been streamlined using technology to help the process. Electronic signatures and applications can be simpler to work with and online portals can make it quicker to provide the required documents. You have the right to sign or deliver documents in a paper format, but ultimately technology has helped take the "extreme" out of the process.
Buying a home is a fun and exciting journey, an adventure that should be as pain-free as possible. In the current interest rate environment and housing market, it has set up borrowers for success in finding a home for their future.