It always is important for you to have knowledge of the thing which you are going to do. So, even if you are planning to obtain a mortgage, you should have a clear understanding of the same. You should not only be conversant about the home loan and the real estate market, but you will also have to be aware of the myths associated. Otherwise, you may end up losing lots on a mortgage. In fact, most of the borrowers remain misinformed about the lending process.
Mortgage myths can lead to mortgage mistakes Some of the mortgage myths you need to be aware of are: Good income helps in obtaining better loan terms – Almost all of those self-employed people who had tried to obtain a mortgage, must have found it hard to obtain a home loan, irrespective of their income. Lenders run an income audit before approving a loan application.
The 1099s isn’t as popular with the lenders as that of a W-2. Furthermore, it is not only the income that matters. The debt to income ratio is another very important factor which most of the lenders consider. If you have too high a DTI and too low a credit score, it would not be possible for you to obtain a good offer. You are always required to make a 20% down payment – If the mortgage market remains volatile, it never would be possible for you to obtain a zero percent down payment.
However, it may still be possible for you to find out lenders, who may issue loans for even less than that of the 20% down payment. You may be required to have a good income, a good credit score and a low debt to income ratio. A 30-year fixed rate mortgage is always best – Most of the people believe that the 30 year fixed rate mortgages are the best options.
However, this cannot always be true for one and all. Although the fixed rates can be low, if you check you will find that the adjustable mortgage rates are even lower. The adjustable rates have fixed rates during the introductory years. So, the five or the seven or the ten year mortgages are considered to be quite a good option. This is truer and better an option for those who are planning to move out of the house in just a few years.
Getting loan pre-approval means you have already been approved – The process involved with the mortgage pre-approval concerns the financial situation you are in. This process provides you a clear idea of the amount which you would be able to borrow. Only after you can find a suitable home, would the actual approval process start.
Then, you would be required to provide detailed information regarding your finances like that of the employment and more. Based on the additional information, the amount you can borrow may vary. Paying off the mortgage as soon as possible is a good idea – Most of the people consider it wise to pay off the mortgage as soon and as fast as possible.
However, this cannot be true for one and all and in every situation. Some lenders can charge you the prepayment penalty for paying off the debt too soon. Lenders earn quite a lot through the interest. So, if you pay off the amount too early, they lose out on the interest. So, the above are some of the myths which are commonly associated with a home mortgage. If you are planning to buy a home and finance it, you will have to avoid believing in these myths. This article has been contributed by Sam Stockdale, a financial writer specializing in mortgage. Immersing himself with the financial sector, he has covered topics including real estate investment, lending and borrowing, managing finances and credit advice.