Myths can be confusing, especially when it comes to getting a mortgage. While it’s important to do your research during the home-buying process, you can’t believe everything you hear. Here are the four most common mortgage myths, debunked.
Myth #1: Pre-Qualification and Pre-Approval Are The Same
Many home buyers believe that pre-qualification and pre-approval are the same thing, which is one of the most common mortgage myths. However, there is a significant difference between the two.
A pre-qualification is the first step and will give you an idea of what kind of loan you may qualify for. It’s common for a prequalification to rely on self-reported information, instead of verifying by pulling your credit report or reviewing financial documents. This means a pre-qualification is typically a ballpark estimate.
A mortgage pre-approval is a more involved process that will give you a better indication of your ability to qualify for a mortgage. Think of it as the second step above being pre-qualified. Lenders will take a look at your income, assets, credit history, and debts.
Myth #2: Getting Pre-Approved Guarantees You Will Get The Loan
Another common misconception is that if you are pre-approved, you are automatically going to get the loan. Although that would be ideal, that is not the case. Many times, homebuyers who are approved for a mortgage find out at a later time they’ve been denied for their home loan.
There are many reasons why you may be denied a mortgage, even after pre-approval. This includes changing jobs, opening up new credit cards and loans, just to name a few. You should avoid this while you are in the middle of the mortgage process.
If for any reason you make one of these financial changes, make sure to consult with your lender and let them know to make sure you aren’t sabotaging your pre-approval.
Myth #3: You Need a 20 Percent Down Payment
Another common myth is that only those who can afford a 20 percent down payment can get a mortgage. However, there are many options out there for home buyers, such as FHA loans, which allows you to put a down payment as low as 3.5 percent.
In addition, USDA loans and VA loans usually don’t require a down payment but have certain eligibility requirements.
Myth #4: You Need a Perfect Credit Score
Having a good credit score when applying for a mortgage is very important, however, if you don’t have a perfect credit score, it doesn’t mean that you won’t be able to get a loan.
There are many mortgage options out for those who have scores of 600-650. Of course, those who have credit scores above 700 will have an easier time getting pre-approved, but it doesn’t mean those under that can’t get one too.