Martin Realty & Land Inc.

5 Mortgage Myths Dispelled

Information for

If the idea of buying a house both scares and excites you, that's how it should be. If not, you're probably going into the mortgage-buying process ill-informed. If you're on either end of the homebuying spectrum, here are some misconceptions about mortgages that may bring you to the middle.

Your credit has to be perfect or near-perfect. Two-thirds of the Wells Fargo survey respondents believed you have to have a very good credit score to buy a house. While there's no doubt that a high credit score will help you get a better loan, it isn't a deal-breaker if your score is middling. If you have some credit blemishes and financial scrape-ups but for the most part pay your bills and make steady income, you probably don't have much to worry about, experts say. "While credit is scrutinized, some loan types will allow credit scores as low as 620," says Gaye Rowland, senior vice president of SharePlus Bank. "Other compensating factors such as larger down payments or low debt-to-income ratios can offset some negative credit information. Every situation is analyzed individually."

You must have a down payment worth 20 percent of the purchase price. This, too, is a myth. More than 40 percent of Wells Fargo respondents believed the only way to buy a house was to give a lender at least 20 percent of the purchase price of a house. Again, it helps to have a 20 percent down payment, if you want to avoid paying monthly private mortgage insurance. But many banks and mortgage companies-offer loans that don't require a 20 percent down payment.

A house is a great investment. It can be a good long-term investment, but nothing in real estate is guaranteed. Particularly if you plan to live in the home for several years, and you can’t afford to lose a lot of money, you need to think of your house as a house– not a financial tool designed to pad your investments or retirement.

"People tend to purchase their homes with a little bit too much of an investment mentality," says Michael Goodman, from Wealthstream Advisors in New York City. He adds that some wealthy homeowners get too caught up in the idea that owning a house is a way to reduce taxes. People shouldn't sink a lot of money into one house and count on getting it back.

 Seiler points to findings by Robert J. Shiller, economics professor at Yale University, "House prices only rise at a very low rate in the long run and can show negative real growth for long periods of time," Seiler says.

You own the house the moment you get the keys. That's how many homeowners think, Seiler says. But make no mistake: At the outset, if you haven't put much down and have no equity, your bank really owns your house. After all, consider how much interest you're paying in the beginning. 

Owning a home is the American dream. It may be your ultimate goal, but don't get tunnel vision.

"Many people believe that owning a home is the American dream. For many, it's also their nightmare," Seiler says. "For example, when the economy tanks in a specific geography – think Detroit – it's hard to sell and move to an area with jobs." It also makes matters worse if you can't afford your mortgage payments and fall behind. That's why you shouldn't rush into taking on a mortgage. Arriving is no fun if you can't afford to stay. 

Phone  281-354-5141
Fax  281-354-6627
23449 Highway 59 North
Porter, TX
Ask A Question!
*
*
*
*
* Notes Required Fields
Image Verification
To help us cut down on spam, please copy the letters you see into the space provided, then click Submit.
*