Mortgage Loan Misconceptions: Tips for First Time Homebuyers Shopping for a Mortgage Loan

If you are in the market for a mortgage and are unsure how to go about getting one, there are a number of mortgage misconceptions you may be familiar with. Here is a list of several common misconceptions to get you on the right path to homeownership.

Homeownership Requires a Large Down Payment

In years past if you did not have the necessary down payment of 20 percent you could not qualify for a mortgage. For many potential home owners with tight budgets this down payment is a barrier to home ownership. There are now a variety of zero down mortgage programs to help you purchase your home without a down payment. The most popular no money down mortgage is the 80/20 or piggyback mortgage. The main advantage of a piggyback loan is that you will not be required to purchase Private Mortgage Insurance in order to qualify; this could save hundreds of dollars on your monthly payment amount.

Fixed Interest Rate Loans Are Safest

While fixed interest rate mortgages have the advantage of predictable payment amounts that do not change over time, they are not the best option for every homeowner. If you are in need of the lowest interest rate or payment amount possible, an adjustable rate mortgage or an interest only or option mortgage would best meet your needs. The level of risk associated with an adjustable rate mortgage is very low in the short term; if you plan on staying in your home for a long time these loans become increasingly risky.

Mortgage Brokers Are Only Good For Bad Credit Loans

Many people think that mortgage broker can only help borrowers with bad credit. Mortgage brokers are valuable resources for finding bad credit mortgage loans; however, they can find competitive offers for any homebuyer. Brokers have access to loan offers you might not find doing your own research. A broker could help you match a lender with the best offer for a homebuyer in your particular financial situation.

To learn more about shopping for the most competitive offer while avoiding common mortgage mistakes, register for our free mortgage guidebook: “Five Things You Need to Know About Your Mortgage.”