If you’re in the market to buy a home, you may have a few questions – and a few misconceptions – about how financing a home works. Here are five common myths about buying and financing a home that we have debunked to help educate you on your homebuying journey.
Homebuying Myth #1: I need a 20% down payment to buy a home
Generally, it is financially smart to pay as much as you can upfront when you are buying a home. The more you put down, the lower your monthly payments will be.
The amount you put down also influences how much interest you will pay over the lifetime of your loan.
Depending on the type of financing program you qualify for, you may be required to put as little as 3% down, and in some cases, no down payment is required for qualified buyers.
Homebuying Myth #2: I need a perfect credit score to buy a house.
A credit score is a number determined by a credit bureau that helps lenders assess how well you’ve managed your financial obligations.
If you missed a payment, have large amounts of debt or open new lines of credit in a short period of time, you can negatively impact your credit score. On the other hand, paying bills on time, paying down debt and monitoring your credit history can positively influence your credit score.
The higher the score, the more likely you are to repay your obligations and the less you are seen as a financial risk to creditors. But, just because you have a less-than-perfect credit score, doesn’t mean your dream of owning a house is over.
There are different loan options available to accommodate those who have lower or higher credit scores. Diane Roose and Ryan Vos will evaluate your overall financial situation and help determine your eligibility to qualify for the different loan options available.
Homebuying Myth #3: A 30-year mortgage is the best option.
Although a 30-year mortgage offers lower monthly payments than a 10, 15 or 20-year mortgage, that does not necessarily mean it is the best option for everyone.
Depending on how much you can afford monthly and how long you see yourself living in the home, a mortgage length less than 30 years may be right for you.
If you can afford to pay more monthly, a 15-year fixed-rate mortgage may be more suitable for you. This option can also save you thousands of dollars in interest over the life of the loan.
Another option that is offered at Marion County Bank is an adjustable rate mortgage (ARM). Typically the initial interest rate is fixed for a period of time, after which it resets periodically depending on the current market conditions. An ARM is a great option for certain situations.
Diane Roose and Ryan Vos are experts in helping home buyers determine the mortgage option that is best for your situation.
Homebuying Myth #4: Principal and interest are the only things impacting your monthly payment.
A typical mortgage payment consists of these components:
- Principal – the percentage of your payment that goes toward the original amount of money borrowed.
- Interest – based on the designated percentage rate, this is the cost charged for borrowing money.
- Escrow Payment – if you made a down payment of less than 20% to buy your home, an escrow account will be set up to cover your property taxes and homeowner’s insurance. Each month you will pay 1/12 of your annual estimated property taxes and homeowner’s insurance into your escrow account. When these payments are due, the escrow account will automatically pay these.
- Private Mortgage Insurance (PMI) – if you made a down payment of less than 20% to buy your home, private mortgage insurance is part of your monthly mortgage payment. PMI is paid until you have built up 20% equity in your home.
Homebuying Myth #5: Buying your first home is intimidating.
Make homebuying less stressful by using an experienced, trusted and local loan officer who will take time to explain the mortgage process. Marion County Bank’s Diane Roose and Ryan Vos work hard to make the home buying journey a smooth one. They have a wide variety of loan options to fit your needs, expansive knowledge of the local housing market, and solid relationships with area realtors, attorneys, and appraisers who will work with you to make home ownership a reality.
Don’t just take our word for it. Check out these reviews:
“Marion County Bank was great to work with for our first home mortgage! Gave us good competitive rate and made the process as painless as possible” -- Google review
“Diane was very honest and easy to work with. She told us what we needed in advance and helped us reach realistic goals when we were thinking about buying a house. She helped us find our perfect budget and made the usual stressful and complicated project pretty straight forward and simple. She definitely is a great asset!” – Zillow.com review
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