Mortgages can be confusing, especially when there are so many misconceptions surrounding the process. Whether you’re a first-time homebuyer or a seasoned real estate investor, it’s important to be aware of these common misunderstandings about mortgages in order to make informed decisions. Here are five of the most common misconceptions about mortgages and why they’re wrong.
Misconception #1: You need perfect credit to get a mortgage
This is one of the most common myths about mortgages out there and it’s simply not true. It’s true that having good credit is important for getting approved for a mortgage, but lenders do consider other factors as well. Your income level, employment history, and other financial factors can all play into whether or not you get approved for a mortgage. So if your credit isn’t perfect, don’t worry! You may still be able to qualify for a home loan.
Misconception #2: Mortgages are too expensive
Another common misconception about mortgages is that they are too expensive for most people. While it’s true that buying a home with a mortgage often requires more up-front costs than renting an apartment does, this doesn’t necessarily mean it’s too expensive. The costs associated with buying a home often pale in comparison to the long-term savings of owning property—especially if you’re able to take advantage of mortgage interest tax deductions and other benefits associated with homeownership.
Misconception #3: Mortgages are only available through banks
While banks certainly offer mortgages, they aren’t the only option available to potential homeowners or investors looking to finance their purchase. In fact, there are many private lenders who specialize in providing loans at competitive rates—and these lenders often provide more flexibility than traditional banks when it comes to approving borrowers with less-than-perfect credit scores or incomes that fall below certain thresholds. Private lenders have become increasingly popular over the past few years due to their ability to provide quick financing solutions for those who may have been rejected by traditional banks or don’t want the hassle of dealing with them.
Misconception #4: Fixed-rate mortgages are always better than adjustable-rate mortgages
While fixed-rate mortgages offer the stability and predictability of payment, they may not necessarily be the right choice for you. An adjustable-rate mortgage (ARM) can offer a low-interest rate over a short period before it adjusts to the current rate. If you only plan to stay in your property for a shorter period (i.e. 5-7 years), you can take advantage of the lower initial rate on your mortgage.
Depending on changes in market conditions, and how much risk you’re willing to take on, an ARM could be the right choice – just make sure you understand exactly how they work before committing!
Misconception #5: You need 20% down payment in order to buy a house
Fortunately, this isn’t always the case; while some lenders may require 20% down payments on certain properties, others may accept much lower deposits depending on factors like your credit score and income level. If you’re worried about saving enough cash upfront for your dream home purchase, rest assured that there are plenty of options available – just make sure you do your research ahead of time so you know what kind of down payment will be required by each lender before applying for financing!
All in all, there is no one size fits all answer when it comes to understanding mortgages—despite what common myths might suggest! Knowing these five misconceptions can help you make an informed decision when considering taking out a loan or investing in real estate property. With an understanding of these five misconceptions, as well as other reliable resources from trusted professionals, you should feel encouraged to start looking into what options are available for you!
ImmediatePay offers free resources to help
The ImmediatePay app has an entire section dedicated to tools surrounding homes and mortgages. Employees who have access to the benefit can see how much they can afford, what an estimated mortgage payment would be, and more in the app!
It’s free for companies to offer Immediate – book a call and learn how easy it is to encourage your team on their journey to financial wellness.
