Heading into home financing can feel like learning an entirely new language. Having the right advisor on the case (a.k.a, your friendly, neighborhood mortgage officers at Sioux Falls Fed) can help clear many of those hurdles. But there are also some basic myths you should avoid believing when it comes to buying a home.
Here are three key mortgage myths debunked.
You’ve probably heard this one anecdotally many times. “Before you buy a house, you need to be prepared to put 20 percent down.” We’re here to debunk this one for you—while it can be one potential pathway, mortgages are not hard and fast about a particular amount of down-payment. In fact, many mortgage options allow you to make as little as five percent of your purchase price as a down-payment, and some others can come with assistance to take advantage of gifted funds in exchange for a slightly higher interest rate or terms.
That being said, you can put 20 percent down if you like, in many cases, and it will frequently reduce your monthly payment and/or your interest rate. It’s just not a requirement most of the time.
So you’ve maybe heard the term “early prepayment penalty” and logged it away in the back of your mind when it comes to mortgages. This supposedly occurs when someone pays off their loan in advance of the projected completion date or simply pays ahead, beyond the monthly requirement. While this is true of some home loans, it’s actually much less common than it once was. In fact, most mortgage programs have eliminated these types of fees.
And while it’s possible your provider of choice might include this fee, be sure to sniff it out before committing—no need to be penalized for being on the ball with your payments!
Have you been hesitant to apply for a home loan because of fear that it will dramatically impact your credit score? While this is technically true, not only does it have a minimal effect, but it’s more often than not entirely temporary. Any sort of application for credit will have a slight effect on just 10 percent of your total overall creditworthiness. And when it comes to getting prequalified for a mortgage, it’s almost always a temporary dip that will go back to normal once it’s clear you’re not applying for credit for nefarious purposes.
Ready to find out how a great mortgage officer gets you across the homebuying finish line? Check out what Sioux Falls Fed offers to ensure a positive home financing experience—know your options.