Are you haunted by the idea that you missed the opportunity to snag your dream home in 2022?
Buying a home is a major financial commitment and it’s wise to plan carefully before making a decision. Just make sure these common myths aren’t keeping you from pursing homeownership.
1. You Need a 20% Down Payment
This mortgage myth is an old one and it’s hard to believe it’s still circulating!
The truth is, buyers are purchasing homes with down payments anywhere from 3% or even zero down with some loan programs. In fact, even a conventional mortgage may only require a 3% down payment. And there are several other programs that allow you to have a lower down payment.
MSHDA loans provide down payment assistance from $7,500 up to $10,000.
Va Loans and USDA loans provide 100% financing of the home price with no money down.
2. Rising Rates are a Deal Breaker
In an ideal buyers market, you would purchase a home when both interest rates and home prices are low, although that isn’t always possible. But keep in mind that rates are not the only factor that influence your monthly payment.
When the Federal Reserve raises interest rates, typically home prices will start to drop as a result of less buyer demand. There are some advantages to lower home prices even with higher rates. For example, a lower home price means a lower down payment. Whether you are putting 3%, 5% or even 20% down, that percentage will be taken from a lower purchase price. Also, you may be able to build equity faster in a lower priced home which will allow you to refinance easier.
So which is more important, interest rates or home price? Ultimately, it comes down to your goals and priorities as a buyer. Consult with your mortgage lender to determine the best scenario based on your financial picture.
3. Your Credit Score Needs to be Perfect
For starters, your credit doesn’t need perfect credit to qualify for even a conventional loan. Usually if your credit score was approved by a landlord for you to rent, you can qualify for a mortgage as well.
There are also FHA loans which have more lenient credit requirements and only require 3.5% down.
If you find your credit score still needs a lot of work, bringing it up doesn’t have to be daunting, and it doesn’t take long at all to make improvements. Your lender can help you prioritize which actions will increase your score more quickly and have the highest impact for improvement.
About Michigan Mortgage Lender, Julie Krumholz
With over 35 years of industry experience, Julie Krumholz is no stranger to the ebbs and flows of the economy. Throughout the years, Julie has worked in processing, closing and loan origination, underwriting, QC auditing and has even co-owned a mortgage brokerage firm. Her passion for helping homebuyers has made her a trusted resource and friend for those looking to make the dream of homeownership a reality.