Two of the Biggest Mortgage Myths Holding Back Homebuyers
You've compared the cost of renting versus buying and you believe homeownership is financially doable. It sounds like you're ready to graduate from renter to homeowner, so why haven't you applied for a mortgage?
Chances are, you’re like many would-be homebuyers who think they don’t or can’t qualify. According to Realtor.com, “46% of potential homebuyers fear they won't qualify for a mortgage to the point that they don't even try.” Understandably, a mortgage rejection can knock the wind out of you and break your confidence. But getting a mortgage might not be as challenging as you think.
There's a lot of misconceptions regarding mortgage requirements; and sadly, these misconceptions keep many on the fence. As your trusted mortgage lender, we’re here to debunk these common myths.
Here are two of the biggest mortgage myths you need to stop believing.
Myth #1: You Need a 20% Down Payment
Twenty-percent down payments were the norm prior to the 1980s. Mortgage lenders have since relaxed their down payment standards, yet some people still believe 20% down is a hard and fast rule. It’s an ideal percentage, but certainly not required.
Because many people overstate the amount needed for a home purchase, down payment hurdles prevent roughly 70% of renters from buying.
“There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment,” says Rob Chrane, CEO of Down Payment Resource.
Cherry Creek Mortgage urges you to get off the sideline and discover our selection of flexible programs requiring as little as 3% to 5% down, whether you’re a first-time homebuyer or a repeat buyer. Buying a home is an expense, but our low down payment solutions and down payment assistance programs can help you get the keys to your future.
Myth #2: You Need Excellent Credit for a Mortgage
If your credit score is just okay, maybe you’ve talked yourself out of submitting a home loan application. You know the importance of a good credit score. But what you might not know is that a mortgage approval doesn’t require A+ credit.
This isn’t meant to downplay the benefits of a higher score, which will help you secure a lower mortgage rate and reduce your overall mortgage cost; but if you put off buying a home because you’ve yet to achieve a 700 or 800 credit score, you could miss out on a good deal. The longer you wait to purchase, the greater the risk of interest rates increasing.
One survey found that 54% of Americans didn’t know the FICO score necessary for a mortgage approval. Some people believe good credit is a score 780 or higher. However, Ellie Mae’s recent Origination Insight Report revealed that 53.2% of approved mortgage borrowers have credit scores between 600 and 749.
So while there's nothing wrong with aiming for the best credit score possible, don't think you have to put off homeownership because of a low score. Several options are available to you, including conventional home loans that allow credit scores as low as 620, and FHA home loans that allow credit scores as low as 500 to 580.
Even with limited cash and a lower credit score, there’s plenty of options to help finance your dream. Let the loan experts at Cherry Creek Mortgage find a mortgage that's right for you.