As the spring and summer buying seasons quickly approach, prospective homebuyers have to remain careful about falling for mortgage myths.
Let’s dispel the following three mortgage myths:
No. 1: Buyers must have a high credit score
Having a high credit score won’t hurt, but subpar scores won’t bar buyers from purchasing a house. Buyers can still take out a mortgage if they have scores below 700, sometimes even in the 620-630 range, according to SmartAsset. The catch, however, is that buyers with lower scores typically pay more in interest.
Buyers shouldn’t let low credit scores stop them. They should work to increase that number and look into taking out a Federal Housing Authority-backed mortgage.
No. 2: Pre-qualification and pre-approval are the same
Achieving pre-qualification isn’t the same as being pre-approved for a mortgage, Realtor.com explained. Pre-qualification only gives buyers an idea of a mortgage amount they qualify for. Realistically, pre-qualification is not a concrete document and won’t help in the buying process.
Instead, buyers should seek pre-approval because it indicates a lender has already collected the necessary documents and pre-approved a buyer for a certain mortgage amount. Sellers know pre-approved buyers are serious about making an offer, so it’s best to go to through the pre-approval process.
No. 3: 30-year fixed rate mortgages are the best
While 30-year mortgages are the most common, they aren’t necessarily the best option.
Buyers who can afford higher monthly payments may want to opt for a 15-year mortgage so they can pay off a house in half the time.
In other instances, buyers may want to consider an adjustable-rate mortgage if they want lower interest rates and monthly payments early in the loan’s life and can handle future variable rates, Bankrate stated.
Taking out a mortgage is a life-changing decision, which is why it’s important buyers bust common mortgage myths.