As first-time homebuyers grow curious about the home-buying process, they often turn to friends and family for advice about purchasing a home. While these sources can provide useful tips and information, they also may perpetuate some common home buying myths.
While family and friends may have the best intentions when sharing their purchase experiences, it is important to make sure that first-time homebuyers have accurate information. As such, there are many resources first-time buyers can use for learning about the home financing process, including attending local mortgage seminars or researching online. Many national mortgage lenders often have educational resources and mortgage tools on their web sites.
So what are some of these common home-buying myths?
Myth 1: You need perfect credit. An individual’s credit score will significantly affect his or her mortgage loan approval and interest rate. Credit scores may range from 500 to 850, but the majority of scores are between 600 and 700. The higher the score, the more options you will have when looking for a mortgage. Along with your credit score, lenders will need to consider other factors before they approve a loan. Carefully review your credit report and immediately contact the credit reporting bureaus to correct any
errors. You will want your credit report to be accurate by the time you apply for a mortgage.
Myth 2: Owning a home is more expensive than renting. In many markets, owning can be as affordable as renting, especially when you consider the tax advantages of owning a home. Unlike rental costs, which increase over time, fixed-rate mortgages provide consistent monthly principal and interest payments for the life of the loan. As you make payments, the money will be applied toward the principal, increasing the equity in your home over time. Historically, owning a home has been one of the best ways of building wealth in America as home prices generally increase over the life of the investment.
Myth 3: Lenders share your personal information. Your personal information is protected by federal and state privacy laws. Generally, lenders must get your permission to share personal financial information with non-affiliates.
Myth 4: The mortgage process is too long and complicated. With the right resources, the process of buying a home and obtaining a mortgage can be simplified. Expect an experienced loan officer to review the home financing process with you, define terms, and address concerns to find the financing option that is right for you. In addition, many home lenders offer a number of online resources such as payment calculators, appraisal tools and a glossary of commonly-used mortgage terms to simplify the home-buying process.
Myth 5: Lenders love to make you wait. Mortgage lenders really don’t enjoy making you wait, but it does take time to review your application. Although some lenders may give you a preliminary and conditional pre-approval based on the information provided in an application, they will need to verify this information. This typically involves confirming employment and income, financial assets, and assessing the value of the home you are purchasing. Other documents, such as a payoff statement, may have to be ordered as well. Because lenders must rely on the response time of third parties, the process may take longer than anticipated. Ask your lender about what to expect when you submit an application and to keep you informed of unexpected delays