Homebuyers, especially first-time homebuyers, may have heard or read a number of things about the mortgage process that are not quite true. Things that they believe are facts turn out to be either old information that has changed or something that was never true in the first place. Here are a couple of the misconceptions that many homebuyers still have about mortgages:
- Mortgages require a 20 percent down payment. At one time, this was true – most lenders did want to see twenty percent of the purchase price put down upfront. However, while this is still ideal, it's no longer true. Those who can't make a twenty percent down payment have a number of loan options, some of which require no down payment at all. However, most of the time borrowers will have to pay for private mortgage insurance if their down payment is fairly small.
- Being pre-approved and pre-qualified are the same thing. This is not true. Pre-qualifying simply means that a borrower has spoken with a lender and is ready to apply for a mortgage. To sellers, being pre-qualified means very little. Being pre-approved, however, means that the lender has been given all documents needed and has submitted the borrower's information to an underwriter. The loan still has to be approved officially by the underwriter, but borrowers have a letter that states they have been pre-approved for a specific amount. It puts them in a strong position to make an offer.
These are just two of the misconceptions that many borrowers have. Check out our article debunking another six mortgage myths.