We’ve fallen for them before, whether it was from a friend or an online article. Myths about the mortgage process can run rampant as nervous first-time buyers seek any answers to help quell their worries. This can be detrimental to educating buyers with real, important information. It’s hard to break old habits, but we can begin that process by debunking these 5 Maryland mortgage myths.
Myth #1: You Need a 20% Down Payment to Buy
This is a myth that probably originates from how discussions about down payments are framed. Namely, that 20% figure is the recommended amount you should have saved for a down payment. In some cases, lenders will only grant you a loan if you have at least that much to put down. That being said, there are absolutely other options to avoid putting 20% down. A Federal Housing Administration-backed loan, or FHA loan, allows buyers to put as little as 3.5% down. And popular to contrary belief, there are no maximum income limits on FHA loans. Additionally, veterans or active service members can access VA loans, which may allow the purchase of a home with no down payment at all. All that being said, if you can afford to put 20% down, that is still the recommendation as it will help shorten your loan term and interest rate. But it’s important to remember that there are more affordable options out there.
Myth #2: Pre-Qualification is a Guarentee of Loan Amount
This Maryland mortgage myth, unfortunately, comes from lenders or brokers that don’t provide enough clarity to their clients. Pre-qualification is an essential step in the mortgage process, but it is just that: a step. Pre-qualification exists to help give you an estimate of how much you may be approved for. This is not, however, a guarantee. Pre-qualification is a tool to help simplify the shopping process so you have an idea of what you can afford. That amount is not set in stone until you’ve actually signed your loan documents. Between pre-approval and then, your lender needs to dive in-depth into all your financials to confirm how much you can actually be afforded.
Myth #3: 30-Year Fixed Rate Mortgages are Always the Best Option
This myth is pervasive because of the popularity of 30-year fixed-rate mortgages. And for many buying scenarios, they are a great option as they allow for stability, especially for first-time buyers. However, there is a multitude of mortgage options out there, each that benefits certain scenarios differently. Loans with shorter terms may help benefit investment purchases or those with more cash who want to pay a lower mortgage rate. It’s important to consult with your Maryland mortgage broker before narrowing your sights on one type of mortgage loan.
Myth #4: Renting is More Affordable Than Buying
At first, the prospect of buying a home can seem daunting, and expensive. Renting is perceived as the cheaper option as it’s often the stepping stone to purchasing. But the reality is that over time, renting can incur more costs while relaying fewer benefits. Initially, renters stand to save money compared to buyers, who have to pay additional fees such as property taxes on top of their monthly mortgage. However, each mortgage payment you make goes back into your home’s equity. This is building a tangible financial resource for you long-term, as opposed to renting where the money just goes to a landlord. In many cities and states, rent can also be adjusted at the landlord’s discretion, meaning you have little recourse against rising rates. So while this Maryland mortgage myth isn’t straightforward, it is clear that buying endows more long-term financial benefits that can help you save money over the years.
Myth #5: It’s Better to Strike Out Alone Than Work with a Broker
This Maryland mortgage myth is common amongst the “do-it-yourself” financial communities online. While it is perfectly possible to secure a good mortgage rate by yourself, for many of us in our busy lives, the legwork simply isn’t worth it. That’s not to mention that certain lenders may only work with qualified brokers to get you the best rates. Mortgage brokers exist to help you make the most of the mortgage process, demystifying each step and using their connections and experience to secure the best available option. Mortgage brokers can be an invaluable resource.
Whether you want to seek your own loan or work with a qualified broker, the team at Federal Hill Mortgage is here to help. As the East Coast’s top-ranked mortgage originators, our team of brokers and lenders helps guide you through the challenges of attaining a mortgage so you can get one step closer to buying the home of your dreams. Apply today to get started.