Are you nervous about applying for a mortgage? Don’t have perfect credit? Can’t come up with 20% as a down payment?
You’re not alone!
The mortgage industry suffers from quite a few myths about the difficulty of getting yourself into a home. We want to help. Let’s look at some common “mortgage myths” to learn why sometimes the myth is scarier than the truth. Let’s get started!
- Pre-Qualified is the same as Pre-Approved
- You Need Perfect Credit
- You Can’t be in Debt
- You Need a 20% Down Payment to Get Started
- First-Time Home Buyers have Limited Mortgage Options
Pre-Qualified is the same as Pre-Approval
Although these terms sound alike, there is a big difference between them. Let’s have a look at some of the key differences and learn how UICCU can help.
Pre-Qualified: A pre-qualification typically takes a few minutes. Usually, you answer a couple questions about yourself and your financials and you can be pre-qualified for a mortgage. Sounds great, right?
These days, sellers tend to prefer a little more information about your financial picture. A pre-qualification typically doesn’t include enough information to get you into a home.
Pre-Approval: A pre-approval, on the other hand, is more preferable to sellers. It gives sellers the confidence they need to get you into a home. While it may take a little longer to get pre-approved, you walk out with a maximum loan amount based on your finances – ready to find your dream home.
At UICCU, we focus on getting pre-approvals for our members. Our goal is to help you shop, budget, and buy your home with confidence. Learn more about pre-approvals today!
You Need Perfect Credit
Sometimes life throws you a curve-ball. Sometimes the unexpected happens. We’re all human.
Having a higher credit score will qualify a lower interest rate and reduce the amount of interest on your loan. To save yourself the most money on your home, we recommend getting your credit in the best shape possible. We’ve even written blog posts on credit basics and 8 tips for a great credit score to get you started!
However, you don’t need perfect credit to purchase a home. Most of our mortgage options allow credit scores as low as 620.
You can’t be in Debt
We live in the age of credit cards, student loans, and vehicle payments. Having existing debt doesn’t have to stand in the way of your dream home.
While existing debt can impact your ability to finance a home, your debt-to-income ratio is the key. Debt-to-income ratio is how much debt you have relative to your income. It’s perfectly normal to carry some debt and make your payments every month. In fact, making timely payments on your debt can have a great impact on your credit score and lower your future payments.
If your debt-to-income ratio is bit high, don’t fret. We’re happy to walk you through some steps to improve your situation. We’re here to help, not turn you away. You can contact us anytime!
You Need 20% of the Home Value as a Down Payment
Once upon a time, a 20% down payment was the standard. Times have changed and the most common down payment is 5% of the purchase price.
While a larger down payment will reduce the overall cost of your mortgage, the days of needing at least 20% saved up are gone. Make sure that you speak to a lender to determine how much you’ll need. In the meantime, you can check out some tips for saving more next year.
Help is out there. Let’s work together!
First-Time Home Buyers have Limited Mortgage Options
As a first-time home buyer, you are not limited to a select few mortgage options. In fact, you may be eligible for as little as 3% down payment and Down Payment Assistance.
We also offer USDA Mortgage, FHA Mortgage, and VA Mortgage, to all qualifying buyers regardless of whether you are a first time home buyer. Speaking with a lender about your situation is the best way to find out what programs are available in your area.
Don’t let inexperience hold you back from your dream home! We’re here for you every step of the way.