Brought to you by: S. John Murray's Mortgage Report
Want to be smarter than the average mortgage borrower? Here
are five common mortgage myths and the truth behind them. Read on, and you may
gain an advantage when deciding what direction to take with your home
financing.
1. You need a 20% down payment to buy a home
Historically, many homebuyers were required to make a 20%
down payment to finance the purchase of a home. For a $250,000 property, that
meant ponying up $50,000 in cash. Today, there are popular mortgage options
that allow down payments as low as 10%, 3% or even 0% in some cases. Certain
borrowers may also qualify for down payment assistance programs that can
further decrease their down payment expenses. These options make it possible
for more people to become homeowners sooner or put their money to use
elsewhere.
2. You must have great credit to get a mortgage
You don’t need a spotless credit history and a sky-high
credit score to buy or refinance a home. There are numerous home financing
options available for people with less-than-perfect credit. At Draper and
Kramer Mortgage, we provide financing for borrowers with credit scores as low
as 580, and we may have niche solutions or exceptions available for people with
lower scores. You may also be able to get a mortgage just a couple years after
a foreclosure, short sale or bankruptcy.
3. The mortgage rate you see advertised is the one you
can get
Everyone loves getting a good deal, but comparison shopping
for mortgages is tricky. Most companies who advertise their mortgage rates only
show the rates that are available for “best case” situations. These typically
assume the borrower has a high credit score, low debt and a large down payment
and is financing an owner-occupied single-family home. Speaking with your
lender to get a personalized quote is the best way to find out what rates are
available to you.
4. A fixed-rate mortgage is right for everyone
Fixed-rate mortgages are popular because they offer the
security and predictability of an interest rate and a monthly principal and
interest payment that will never change. However, compared to similar
fixed-rate loans, adjustable-rate mortgages (ARMs) often have lower interest
rates during their fixed-rate intro periods. Since most people sell or refinance
their homes within 10 years of buying, ARMs can end up being the cheaper option
for borrowers who don’t need a long-term fixed rate.
5. You should always pay off your mortgage as soon as
possible
Many people look forward to the day they pay off their homes
and say goodbye to their mortgage payments. However, it doesn’t always make
financial sense to pay off your mortgage early. Since home loans typically have
low interest rates, homeowners may see a better “return” by using their extra
funds to pay off higher-interest debt (e.g. credit card balances) or contribute
to high-return investments (e.g. stocks and mutual funds) rather than paying
off their mortgages early.
Conclusion
Never assume the home financing you need is out of your
reach. Your options may be more accessible, flexible and affordable than you
think. Get in touch for your free quote, consultation or pre-approval to learn
what financing is available to you.
S. John Murray's Mortgage Report