These Mortgage Myths May Hunt You Again

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If you are first home buyer and a mortgage applicant, you may be spending a lot of time on the Internet researching the steps to getting a mortgage. Unfortunately, there is a lot of bad information out there, so it’s hard to find what you need to know. mortgage… Here are three myths that shouldn’t be believed.

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1. You can buy a house only if you have an advance payment of 20%.

The more money you put in at the close of the deal, the cheaper you will need a mortgage. And if you put at least 20% on a regular mortgage, you will avoid private mortgage insurance, a premium that makes owning your home more expensive.

But that doesn’t mean you I can not buy a house less than 20% down. Some ordinary mortgage lenders agree only 5% lower, and many will agree 10%. In addition, there are special loan programs designed for people with a low down payment. This includes:

2. If you are pre-approved for a mortgage, you are guaranteed a home loan.

Obtaining pre-approval for a mortgage it’s a smart move. It tells sellers that you are a serious buyer and also gives you a price range to work with when looking for a home.

But don’t assume that pre-approval of a mortgage is the same as actual approval. If circumstances change between the time you get pre-approved and the time you want to sign a mortgage, for example, if you lose your job or your credit rating deteriorates, you may be denied a home loan.

3. Paying off your mortgage early is always a smart idea.

Many people strive to pay off their mortgage ahead of schedule. This saves money on interest and helps people get rid of that debt faster. V some In some cases, paying off your mortgage early is a smart move. But don’t think that this is always the case.

During these days, mortgage rates extremely low. If you manage to lock in an affordable rate, you can keep your mortgage, take advantage of the related tax breaks, and spend the extra money to buy stocks. This can generate much higher returns than what you will save on repay a mortgage ahead of schedule

Buying sharesfor example can give you 7% annual return, which is a few percentage points below the market average. If you fix your mortgage at 3%, you would be better off earning 7% per year than saving 3%.

Plus, paying off your mortgage early means accumulating more cash in your home, which is a relatively illiquid investment. This means it is not easy to instantly turn a house into cash in your pocket.

If you can manage to get a competitive mortgage rate, then you can simply stick to your original repayment schedule. And to be clear, anything below 4% is historically considered very competitive.

Getting a mortgage can be a daunting task when you are new to the process, but it is important to have a strategy when applying and managing this loan. By understanding these myths, you can better buy a home and manage your mortgage.

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