The process of buying a home is a complex one, and one of the most complex aspects of the process is taking out a mortgage. The mortgage process is made even more intimidating and confusing by the fact that there are some negative myths about mortgages and home loans floating around. Have you heard these myths? Here's the good news: they're not true.
Myth: You can't get a mortgage if you don't have a 20% down payment.
If you're of the impression that you need to save 20% of the home's cost before you're able to buy a home, you might be saving for years! It's true that some conventional mortgage lenders require a 20% down payment. But there are many options that don't require anywhere near this much. FHA mortgages, intended for first-time home buyers, require very little down. If you are a veteran, there are options for you to buy a home with no money down. Tell your lender how much you have available to put down, and they can recommend a mortgage option that's feasible for you.
Myth: You need to have held down a job for two years before you can get a mortgage.
Again, there are some lenders who use this as one of their criteria in determining who they will lend to. There are also other lenders who care less about job security and more about your income, credit score, and future earning potential. If you have not been in your current job for very long, that is a weak point in your mortgage application -- but it is not an automatic failure if you can make up for it in other ways. Don't avoid applying just because you're in a new job!
Myth: A 30-year fixed rate mortgage is always the safest choice.
This is definitely the most popular mortgage option in the U.S., and it is not a bad choice for most people. But depending on your situation, there may be an even better mortgage option for you. Are you just graduating from a professional program with the expectation that your income will vastly increase in the next few years? An adjustable-rate mortgage may be right for you. Are you buying a home that costs far less than you can afford? Maybe you should try to pay it off faster with a 15-year fixed mortgage.
To learn more about mortgages and how lending actually works, reach out to a bank that offers home loans.