15 Sep Mortgage Myths Debunked
Research is a very important factor in any mortgage loan process, and at City Creek Mortgage, we’re here to help you find answers and clarity in your search for the best home loan situation. Our brokers can answer any questions while helping you navigate what can be a complex landscape.
Unfortunately, the mortgage world still has its share of bad information and flat-out myths. Let’s look at a few of the most common misconceptions here, plus what you can do to avoid these areas and get the best mortgage rate.
The Pre-Qualification Myth
We’ve discussed pre-qualification and other application stages in previous blogs – pre-qualification itself is meant for nothing but a very general idea of your budget and the kinds of mortgages you may qualify for. There’s no credit report or background check involved, and neither you or a lender is making any kind of commitment. Some people believe that if they pre-qualify for a loan amount, they’re guaranteed to get that amount – this just isn’t true. Pre-approval, on the other hand, is a far more comprehensive and official process.
Renting Saves Money
It’s a common assumption that renting is less expensive than owning a home, but this is generally backwards. In reality, it’s almost always less expensive to pay a mortgage than to rent a comparable home – especially for anyone willing to put in a bit of time on things like maintenance that are generally covered by a landlord in a rental situation.
30-Year Is Always Best
The 30-year fixed-rate traditional mortgage tends to come to many people’s minds, and while these are popular and often the best option for you, there are plenty of times where there are other preferable choices. The average homebuyer only lives in their home for about seven years – this makes adjustable-rate mortgages potentially more attractive to people on shorter timelines. It could also make a shorter loan term more attractive. Speak to our brokers about any specific questions here.
It’s natural to want to pay off debts quickly, but paying absolutely as fast as you can might not always be the right course of action with a mortgage. Paying your mortgage quickly may lower your principal debt, but that’s not always the same as instant equity. If that money isn’t going back into some kind of benefit for you, you might be better off investing that money and earning more interest than you would by paying a similar amount to your mortgage. Mortgage interest may also be tax deductible.
The rule of thumb in the mortgage industry has long been that a 20 percent down payment or more is needed for a home, and if not, private mortgage insurance will be required. Today, however, there are other options available that make this rule of thumb more of a myth – things like FHA loans and piggyback mortgages (involving a second mortgage to lower loan-to-value ratios) are great options for people who are unable to get 20 percent down and don’t want private mortgage insurance.