According to a recent survey from Fannie Mae, a huge percentage of Americans are overestimating what it takes to secure a mortgage—and those misconceptions about mortgage qualifications could be holding people back from purchasing their dream home.
Fannie Mae’s survey aimed at exploring how well consumers understand the basic requirements for obtaining a mortgage. And what they found were a lot of misconceptions. For example, the average consumer believes you need a 10% down payment and a credit score of 650 to secure a mortgage—when, in reality, you only need a down payment of 3% and a credit score of 580 to qualify. Most consumers (a whopping 77%) aren’t even aware that low down payment mortgage programs exist.
Don’t let your misconceptions about mortgages hold you back from buying your dream home. Getting a mortgage might be more attainable than you originally believed—even if you have a less-than-perfect credit score or a smaller down payment.
Do you know what a home appraisal is, or why it’s so important for you to have? Many people misunderstand this crucial component of the home buying experience.
In a nutshell, an appraisal is a valuation of your home; it’s a way for lenders to ensure that they aren’t providing a mortgage that isn’t worth what the home is worth. Your appraisal must match or exceed the value of your loan, otherwise you’ll run into hiccups.
An appraiser is someone who uses comparable sales in your neighborhood as well as the condition of your home in order to make a sound valuation of your home. They’ll include factors both inside and outside the house.
If an appraisal is lower than the amount you thought the house was worth, there are several options, including renegotiating the deal and paying the difference. If it’s higher, it benefits the buyer. But knowing more about appraisals, whether you’re a homebuyer or seller, can help the whole process go more smoothly. Use this graphic from our friends at Title Source to get started.
Securing the right mortgage is one of the most important steps in the home buying process. With the right mortgage, you can save tens of thousands of dollars over the course of your loan. And if you want to find and secure the right mortgage, the best thing you can do? Shop around
According to a recent study from LendingTree, only about half of homebuyers shop around and consider multiple lenders; according to the study, first-time homebuyers were slightly more likely to shop around and consider multiple lenders (52% vs. 48%) or apply for mortgages with more than one lender (29% vs. 20%). But vetting multiple mortgage options can pay off big time—lowering your APR rate just 0.85 percentage points can translate to over $40,000 in savings on a $300,000 30-year mortgage.
What does this mean for you? Don’t make the mistake of going with your first mortgage option. Take the time to shop around, consider different lenders, and find the best rate—the cash you’ll save will be more than worth the time investment.