Separating Fact from Fiction: Common Mortgage Misconceptions

The average person will own three homes in their lifetime. Whether you’re preparing to purchase your first, second, third, or tenth home, the process can be both exciting and daunting. There’s an endless amount of information out there and plenty of well-meaning people willing to offer a perspective, but it’s easy to encounter misconceptions. My goal is to provide you with accurate information so you can navigate your home purchase journey with confidence. Together, let’s separate fact from fiction to ensure you’re well-informed every step of the way.

Myth: Higher down payments mean better interest rates
While a substantial down payment can have a positive impact on your interest rate, it is just one of several factors at play. Your credit score, mortgage loan type, and current market conditions are some of the other factors considered when determining a rate.

Myth: Having a low credit score is a dealbreaker
Credit scores are important, but they aren’t everything. There are minimum credit score thresholds required to purchase a home, however there are some loan programs that offer more flexibility, including buyers with lower credit scores.

Myth: I can’t buy a home if I have student loans
Prospective home buyers are not required to be 100% debt-free to purchase a home. When reviewing your application, we’ll look at your debt-to-income ratio, which will include your student loans and any other outstanding debts you may have.

Myth: I need a 20% down payment
You don’t need a 20% down payment to buy a home. In fact, many buyers secure their dream homes with less. A 20% down payment can lower your monthly payment and help you avoid private mortgage insurance, but GreenState has programs available with lower down payment options and will work with you to find the best payment solution to fit your financial situation.

Myth: Down payment assistance is only for low-income buyers
Down payment and closing cost assistance comes in various forms for eligible borrowers with different needs. Local and state governments, charities, and other organizations have various down payment assistance programs, and we’d be happy to help you evaluate them. We partner with the Iowa Finance Authority and the Illinois Housing Development Agency to provide affordable home loan options. See details on either of these programs at IowaFinance.com or ihdamortgage.org.

Understanding the realities – not myths – of the home buying process will empower you to make informed decisions. Remember, there may be assistance programs and resources to support you no matter what stage of the process you’re in. When you’re ready to explore your options, please contact me.

COMMON QUESTIONS

Q: What does it mean to “lock in a rate”?
A: A rate lock means your interest rate won’t change for a set number of days and is protected from financial market fluctuations. The date range will depend on your loan program but is typically available for 30, 45, or 60 days. To secure the rate you locked in, your closing must take place in the set time frame.

Q: Have you heard of the summer ceiling fan trick?
A: This is a trick to make the ceiling fan blades spin counterclockwise, which pushes the air down, creating a cool breeze. If you’re unsure how or why to reverse the direction of your ceiling fans, Southern Living provides a great overview.