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Mortgage myths: 4 things to know


family mortgage

Owning a house is the American dream. While shopping
One can be a good financial decision, the reality is not always so optimistic. Between
disaster damage, market recessions and job loss, homeowners can find
themselves and their credit dragged by the mortgage payments and the
Other expenses of owning your homes.

Although home ownership may be the financial right
Choice for some, is not a necessity. There are other ways to generate wealth.
and build a solid credit file. So, before rushing to buy a house,
Consider if it is the best option for you. The following mortgage and
Credit repair myths can help you make better decisions for your future.

1. Myth: "Approved" means that it is a smart choice

A mortgage approval should never qualify as the
final decision of home ownership. Of course, you have the option of owning a house,
But does that mean you should? Not always, according to David Ning, founder of www.MoneyNing.com, a popular personal financing
Blog. The lender's approval decision does not always mean that you can pay

"Mortgage lenders change their loan standards
all the time, but without knowing what the future holds, they generally approve
Buyers rely solely on a snapshot of their current income and assets, "says Ning.
"Your job may be on unstable ground, but the lender can never say
of your mortgage application. "

"Just because the mortgage company approved it
for a loan does not mean that you can really pay (or want) to make payments
in the long term, ”he adds. “Obtaining approval is only the first step. You still have
to assess your own situation and make sure you feel comfortable with the
long-term commitment required for home ownership before taking the step. "

While mortgage lenders are generally good at
Calculating the risk, only you know your complete financial situation. Don't assume
that your calculations are complete or take into account your best interests
account. Whenever you borrow, make your own calculations and make sure it is the right one
Choice for you.

2. Myth: you need to borrow before interest rates rise

mortgage rates

Mortgage interest rates reached a record low in
2012 and have largely remained low since then. This makes some potential
Homebuyers think they need to buy now before rates rise again. While
The moment your mortgage can help you get a good deal, it is usually less important
factor that develop a solid credit profile.

"These days, it's hard to get approval for a
mortgage if you have a low credit score, ”explains Ning. "But even if you were
Able to get a loan, the interest rate would probably be very high. That's
Not to say that buying a house will never make sense, but I know that if you can
increase your credit score, you can probably reduce significantly
your monthly payment and, ultimately, the cost you are paying for your dream

Even if interest rates are low, you may be suffering
Borrow now if your credit is not solid. The best rates are only
for well qualified borrowers. Instead of taking a mortgage now, consider doing
Credit repair is a priority to ensure you receive better rates in the future.

3. Myth: if you can pay the mortgage, you can pay the house

While buying a house is the first step of
property, there are many other costs that may arise. Unlike when you rent,
When you own your home, you are responsible for all repairs and other costs.
That may arise.

“Home ownership can be wonderful, but it is also a
great financial commitment, "Ning said." While it is not creating equity with
your rental payments will not be financially responsible for the house if a
A natural disaster would occur in the area where you live. There are always
pros and cons, but just make sure you can comfortably afford to own a home
before deciding to buy that beautiful house you would like to call home. "

In short, property is more than just making your
Mortgage payments on time. The best strategy is to have a safety net ready for
handle repairs, updates and even natural disasters. Insurance can protect you
of the most significant costs of property damage. However, such situations
it can still be a significant financial burden, especially while waiting to be

Don't put your finances and credit at risk when
you buy a house Plan ahead and have a strategy to handle unexpected costs.
Taking all of these property components into account will help ensure smooth navigation.

4. Myth: refinancing will always save you money

refinance mortgage

Refinancing can be a useful tool for borrowers who
They want to reduce their mortgage costs. However, it is not always the right option,
especially if your credit is less than ideal. According to Keith Gumbinger in WE.
There are many reasons why you may not want to refinance.

"While refinancing at the current low rates may
it translates into big monthly savings on your mortgage bill, those savings don't
come without significant upfront costs, "he wrote." While it is possible to save
money by refinancing at a slightly lower interest rate, is a very slow penalty

So, if you are not in a position to
improve your interest rate, you may not save much money or even lose something.
Refinancing can also come with other difficulties. For example, you may need
To extend your term.

"If you have already refinanced and shortened the
term of your loan, you might be forced to get a longer term loan if
refinance, ”Gumbinger explained. "Usually, the shortest fixed rate mortgage
the term is 10 years. "

In other words, refinancing your mortgage is usually
It is only advisable if you still have at least 10 years left on your loan and wait
to receive a significantly lower rate. Otherwise, you may not recover the
initial refinancing costs.

With these myths of credit and mortgage repair
exposed, you may want to reexamine your plan to buy a house. To consider
prioritizing repairing
your credit
before getting a new mortgage. This can help you improve
your options and maximize the financial benefits of home ownership.

You can also start a conversation on our social media channels. Like and follow and interact with us in Facebook, InstagramY Twitter.

Article updated June 13, 2019

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