6 Modern Mortgage Myths You Shouldn’t Fall For
Are you getting ready to buy a new home and feel both excited and nervous? We get it!
A house is probably the most expensive item you’ll ever buy. For that reason, knowing everything you can about home buying is essential before starting the process.
Throughout this article, we’ll break down some popular mortgage myths so you can confidently search for a new home and easily navigate the lending process. Let’s get started.
Myth #1: Getting Pre-Qualified Is the Same as Getting Pre-Approved
Getting pre-qualified or pre-approved is the first step in the mortgage process, but these options differ. Knowing which one to choose could be the difference between moving into your dream home and losing it to another buyer.
With a pre-qualification, you provide financial information to your lender. However, they do not verify this information. Instead, they take your word for it and give an estimate of what they think you’ll likely be approved for. There is no guarantee that you’ll be approved for this amount, though.
A pre-approval, on the other hand, means a lender has approved you for a specific loan amount. To get pre-approved, you must provide proof of your financial situation, such as recent pay stubs, credit scores, bank statements, etc. The lender then performs a credit check, and you receive a letter stating your approval amount.
If you’re competing with another buyer for a home you love, having a pre-approval can give you an advantage. Check out this article to learn more about the differences between pre-qualification and pre-approval.
Myth #2: You Need To Put at Least 20% Down To Qualify for a Mortgage
This is one of the most common myths that catch first-time homebuyers. When buying your first home, the thought of making a 20% down payment can be scary. But you don’t necessarily need to have that much saved up.
At Connexus, we offer a 3% down Mortgage option3 to help you buy a home sooner—without depleting your savings.
Of course, a larger down payment helps lower your monthly payment. It can also help you avoid paying for Private Mortgage Insurance, commonly known as PMI. However, a 20% down payment is not always required to get a mortgage loan.
Myth #3: You Need an Excellent Credit Score
While having an excellent credit score can help secure a better mortgage rate, having a less-than-stellar score isn’t always a deal breaker.
Many lenders use the FICO model when evaluating credit scores. In late 2023, the national average FICO® Score stood at 717. Though a score in the low 600s is generally considered subprime, it doesn’t necessarily mean a mortgage is out of reach.
If you have a lower score and would like some ideas for increasing it, here are seven ways to improve your credit score.
Myth #4: Mortgage Rates Are the Same Everywhere
One common myth is that you’ll get the same mortgage rate wherever you go. This is not true.
For example, many credit unions (Connexus included) have lower fees than big banks. This can sometimes allow them to offer lower rates.
When it comes to mortgages, it’s essential to shop around because even a small rate difference can mean a lower monthly payment and significant savings over the life of the loan.
Check out the latest Mortgage rates at Connexus. Then, book a call with one of our lenders to learn more about the options we offer.
Myth #5: Renting Is Cheaper Than Owning a Home
A mortgage seems expensive when you look at the price you’re paying for your home. But you have to compare the mortgage payments against the rent payments.
Yes, sometimes a monthly rent payment is cheaper than a monthly mortgage payment, but there are a few things to remember:
- First, owning a home allows you to build up equity—a valuable asset. Renting doesn’t lead to equity.
- Second, rent payments can increase yearly, whereas many mortgages offer a fixed rate and payment that will not change.
- Lastly, owning a home can include tax benefits.
Are you curious about how much home you could get for the cost of your monthly rent payment? Use our Mortgage Payment Calculator to crunch some numbers.
Myth #6: The Mortgage Process Is Difficult
This is the classic myth. Mortgages are known for being difficult and stressful. In reality, it’s all about the lender. Some lenders don’t communicate well, making it difficult for borrowers.
At Connexus, we pride ourselves on making Mortgages simple for our members. Our Mortgage Team guides you through the process every step of the way, making it as smooth as possible.
Choose Connexus for Your Next Mortgage
Here’s what one member had to say about our Mortgage process: “Connexus has always been so quick to respond to my mortgage questions. And what an engaging group. I feel like I have more than just a banking relationship — I feel like I have new friends!” – Chris, Georgia
While there are many mortgage myths, the truth is that getting a mortgage can be easier and more affordable than many people think.
Ready to get started? We’re here to help! Check out our affordable Mortgage options and rates and book a call with one of our expert lenders to begin your home-buying journey.