There are many myths surrounding mortgages that make this process seem complicated and overly confusing, especially when it is your first experience. You find yourself unconfident about any decision you make, simply because you are no longer able to tell true from false information. We know your struggle. For this reason, we gathered a list of the most common myths about the mortgage to help you get a clear understanding of this process:
You must be debt-free to buy a house:
Another myth we were impatiently waiting to debunk is this one: You can’t buy a house if you are already in debt.
Truth is, from student loans to car payments, almost everyone is already in debt. Therefore, it is impossible to assume that anyone who succeeded to get a mortgage was debt-free. The main requirement for your bank checks to determine whether you are approved for the mortgage or not is your debt-to-income ratio to be equal to or less than 36%. This ratio compares your total recurring debts to your monthly income. In case you found out that your ratio exceeds 36%, then you may not be eligible for the mortgage. This means you should either increase your income by adding another income source or decrease your debt by paying off part of it before applying again.
The only upfront expense you have is the down payment:
Although you may find yourself saving for the down payment first, since it is the biggest cost to cover, there are other expenses you must consider too. These additional expenses can include the closing charges, in addition to any other fees needed to complete the transaction. The additional costs are not as high as the down payment. Usually, these extra charges do not exceed 2% of the overall sale price, and you can actually split some of them with the seller. Now that you have a better knowledge of the mortgage and its basics, you can move to more detailed questions related to the loan and interest rate. But don’t worry, you won’t need to make any calculations by yourself. Let a mortgage calculator do the work and free up your time to consult lenders and compare the offers.