Deciding To Live On A Budget

Buying a new home is a complex endeavor that leaves some home buyers unsure about which options are the best for them. There are many myths that surround residential mortgages and the home-buying process, and believing some of them could lead you to make the wrong choices for your home purchase. Here are some common myths and why you shouldn't believe them.

You Have To Put 20 Percent Down

Some people believe that they have to have 20 percent of the home's cost in the bank before they can get a loan. In some cases, 20 percent may be more than you can afford, but that doesn't mean that you can't purchase a home. There are many loan programs, such as VA and FHA loans, that let you put a lower percentage down on a home. With an FHA loan, you can put as little as 3.5 percent down on a home, which makes it easier for you to come up with the money for appraisals, closing costs and other home-buying expenses.

You Should Always Choose The Bank With The Lowest Interest Rate

While you want to make sure that you get a mortgage with an affordable interest rate, it's important to remember that not all banks are created equal. Before you sign with a lender, take some time to research the bank. Look for consumer ratings, customer reviews and customer service scores to make sure that the lender you choose will be able to provide support throughout the length of your loan. You want to make sure that your lender is reputable and is going to look out for your interests as well as the bank's. Remember that you can always buy points on your mortgage to lower your interest rate, but it isn't easy to switch lenders once you close on a home.

Your Credit Needs To Be Perfect

Having excellent credit is one path to home ownership, but you don't have to have a perfect credit score to buy a home. The same loan programs designed to reduce the amount of your required down payment can also help people with less-than-perfect credit. People with a credit score of 580 or better can qualify for an FHA loan, and certain loan programs require a credit score of 500 or better. Having a low credit score might result in higher interest rates, but it won't immediately disqualify you from buying a house. The lender will still look at other factors, including your employment, to determine your fitness for a mortgage.

Understanding what you need to qualify for a mortgage and what to consider when choosing a lender can help you make the best decision for your new home purchase. If you are unsure about any step in the process, talk to a financial advisor or real estate agent who can walk you through the home-buying process.

For more information, contact Commonfund Mortgage Corp or a similar company.