There are a lot of mortgage misconceptions out there. And we want to make sure you’re as prepared as possible; so we put together a series of Mortgage Minutes to help you get educated. Read on to find out the truth about some of the biggest first-time homebuyer myths.
You need a 20% down payment.
Sometimes it’s true and providing a 20% down payment does have its benefits. However, you don’t always need to have that much to buy a home. There are several loan options that require a lot less for a down payment, like 3.5%. And there are even some loan types that are as low as zero percent down. Yes, zero percent down on a mortgage. Check in with a loan officer to see what you actually qualify for 🙌🏻.
I can choose to pay for private mortgage insurance (PMI).
Whether or not you have to pay for private mortgage insurance (PMI) will often depend on your loan type. Depending on your scenario, you may only be eligible for certain home loan options. While you might be qualified for some loan types that might not require PMI, this will not always be the case.
I can buy a house even if I have student loan debt.
Student loan debt does not by itself hold you back from financing a home. The main thing you’ll have to concern yourself with is keeping up with your payments. Showing you’re responsible with debt payments makes you look like a good, responsible candidate to lenders and credit bureaus.
I can buy a house with a 500 credit score.
In general, this can be true. There are lenders out there that will accept a credit score of 500. However, we at Movement do not; we require a minimum of 580. This is not to discriminate – having a credit score as low as 500 can make payments you owe a lot pricier than having a higher score. So while you may be able to with other lenders, you’ll have to pay a lot more 💸. Ideally, work on your credit score as much as possible to help you with the best set-up for a mortgage.
A website gave me an accurate credit score for a home loan.
Most websites you have access to look at online don’t offer the full story that goes into the credit portion of your mortgage application decision. Those websites are often showing you a summarized score from one or two credit bureaus. However, when it comes to credit for a home loan, lenders are usually looking at your FICO score (culminating all three bureaus) and the full credit report, not just the score. So prepare to hear something that may sound a little different from your loan officer than what you’re seeing on your credit app!
All first-time homebuyers can get a grant or special program.
Unfortunately, this is not the case for all first-time homebuyers 😅. While there are many grants or special programs for those individuals, it may not always be applicable to all buying a home for the first time. Qualifications for programs can vary by state, loan type or even where you’re looking to buy. However, check with your loan officer on what may be available to see if you’re in luck!
My monthly payment will be what I saw online.
The only way to know exactly what your payment will be is to go through the application process. Any mortgage calculators you see online are offering estimates. There are several factors that play into giving you an accurate payment amount that may not be plugged into those online calculators. Luckily, Movement’s application takes moments to do online and strives to give you that answer within six hours* of your completed mortgage application.
Lenders don’t care where my cash deposits come from.
Lenders want to know that the money you have is actually yours. If you have multiple deposits on your account statements that aren’t verified places of employment, it starts to look a bit sketchy. Make sure if you have multiple deposits that you can offer reasonable explanations of where they’re coming from.
Anyone can give me money for my down payment.
Any family members can give you money toward a down payment! The only caveat is that they need to fill out a letter verifying that it’s a gift for your down payment you’re not expected to pay back (aka, another loan). Individuals outside of your family can become gray areas on gifting you funds, but that’s what your Movement loan officer is there for 💪.
I can put my whole down payment on my credit card.
Credit card charges are essentially seen as multiple small loans. It doesn’t look very responsible to lenders if you’re trying to put your down payment on a credit card: Major red flag. A down payment is seen as a good faith effort and agreement that you are a responsible borrower and will be able to keep up payments for the massive amount they just agreed to lend you. So sorry, not even a portion of it should be put on your credit card 🤷.
Multiple credit pulls won’t hurt your score.
Mostly, at least. If you’re shopping around with different lenders that are all pulling your credit score to give you an estimate, credit bureaus will notice that reasoning. Therefore, your credit score shouldn’t drop due to this. However, if you’re shopping around with upward of six to eight lenders, they may start raising an eyebrow. Also, if you’re pulling credit for lots of other reasons outside of lenders, that will start to look questionable as well. Although, why shop around when Movement is right here 😉?
We hope you found this helpful in knowing what is true and false in major first-time homebuyer myths. Being informed on the facts will help make sure you’re ready to purchase your first home.
Ready to see what you qualify for now? You know what to do: Contact your local Movement loan officer 😊.