It’s a spooky time of year right now with Halloween coming up next week, but it’s not just the horror films and haunted houses that are giving people a fright this fall. Common myths about what it takes to get a loan in today’s market are actually scaring buyers away from getting into the real estate market. We sat down with a Caliber Home Loans officer the other day to discuss what some of the top myths people fall victim to when it comes to buying property. If you have been guilty of believing any of the following assumptions or asked similar questions, you’re not the first! We understand that buying a home can be a stressful experience and might seem out of reach, but hopefully these answers will leave you feeling more knowledgeable about the loan process and maybe even encouraged to learn more about the opportunities available to you.
Myth #1: I need a 20% down payment to buy a home
This belief has been around forever, and we are happy to say that there are many low down payment options out there including 5%, 3%, and even 0% down! The concern with the low down payment options is higher interest rates, but these days lenders are offering great 0% down programs with competing rates including USDA rural housing loans.
Myth #2: I will be stuck paying for high mortgage insurance in a low down payment program
In simple terms, mortgage insurance is a fee to offset the risk for the mortgage investor. It is true, there are situations where the program available comes with a set mortgage insurance. However, not having the means to put 20% down doesn’t necessarily trigger a high mortgage insurance. To save yourself some money, there’s ways to buy it away upfront or build it into the interest rate!
Myth #3: I need a perfect credit score to qualify
Yes, taking the time to build up your credit score is definitely going to pay off when it comes time to buy property. Focusing on things such as paying off student or credit card debt, not making large purchases like buying a car, and maintaining a steady income will all affect credit score in a positive way. When it comes down to qualifying for a loan, there are low down programs that allow for 620 credit score and some even some as low as a 580! So, don’t get discouraged or assume your score isn’t high enough before speaking with a lender that can lay out some options to look into.
Myth #4: Lender credit inquiries will ruin my score
There are two different types of credit checks; soft and hard pulls. The hard pulls are associated with actions such as applying for credit cards, submitting rental applications, or even when applying for a new job. What the credit scoring system allows is for consumers to shop for certain services without your score getting hit after each inquiry, and mortgages are included in those services! The system actually allows a consumer to meet with multiple lenders during a 30 day window and the various credit pulls will only show up as one inquiry.
If any of these myths resonated, I would love to direct you to a seasoned loan officer that may have the right program available. It never hurts to ask the questions. Getting another perspective might help you see what you weren’t able to before!