Homeownership is a smart move when it comes to adding value to your hard-earned dollar. So don’t get caught believing these 4 myths when you purchase your first home. It will cost you.
Myth #1. Your credit score doesn’t really matter as long as you can get approved for a loan.
It’s true your credit score doesn’t have to be perfect. But did you know that the higher your score is, the better the rate you’ll get on your home loan? Don’t apply for a mortgage if you know your credit isn’t great. It will cost you in the long run. Instead, work on getting your credit back up. Get a free report and fix things that aren’t right. Pay your credit cards on time every month. Building your credit will help your financial future.
Myth #2. You’re golden if your mortgage payment equals 30% of your take-home pay.
While your actual mortgage payment might constitute the bulk of your monthly housing expense, that 30% figure is actually meant to all costs of homeownership, like your property taxes, homeowner’s insurance, and even home improvements. Max out that 30% financial guide on your mortgage payment alone and you’ll leave yourself with dangerously little wiggle room in your monthly budget.
Myth #3. You need to put down 20%.
Most people can’t afford to put 20% down on a home purchase. And, that’s okay. There are many loan options now available to help you get into a home without having to save for the big chunk of down payment.
But don’t be fooled into thinking there won’t be additional charges if you put less than 20% down. Private mortgage insurance is a premium that’s added to your monthly mortgage payment when you don’t manage to put 20% down. PMI will typically equal 0.5% to 1% of your loan’s value, which means that if you’re looking at a $300,000 mortgage with 1% PMI, you’ll be charged an extra $250 a month.
Myth #4. A 30-year mortgage is the only option.
The 30-year fixed mortgage is the most common option for financing a home purchase. There are other options too. If you can afford a larger monthly payment, getting a 15-year loan instead of a 30-year loan could shave thousands of dollars off your total cost in the end. As an example, if you’re getting a $300,000 mortgage. A 15-year loan might come with a 4% APR based on your credit, while a 30-year loan might come with a 5% APR. Your monthly payments under a 30-year loan will be smaller, but if you can handle the larger payments, you’ll save a whopping $180,000 over the life of your loan.
Buying your first home is a big decision with lots to consider. I hope you’ll give me a call when the time is right for you so we can get you on the road to homeownership!
 Not based on actual rates or programs offered by Skyline Home Loans.