Debunking 5 Common Mortgage Misconceptions You Need to Know

Clearing up common misunderstandings about mortgages can help you make more informed decisions when it comes to buying a home. Here are five misconceptions debunked.

Debunking Low Credit Score Means You Can't Get a Mortgage

One of the most common misconceptions about mortgages is that you need a perfect credit score to get approved. While a higher credit score can help you secure a better interest rate, many lenders offer options for borrowers with lower credit scores. It's important to shop around and explore different loan programs to find one that fits your financial situation.

Debunking 20% Down Payment Requirement

Another widespread myth is that you need to put down 20% of the home's purchase price as a down payment. While putting down 20% can help you avoid private mortgage insurance (PMI), there are loan programs available that allow for lower down payments, such as FHA loans with a 3.5% down payment requirement.

Debunking Fixed-Rate Mortgages Are Always Better Than Adjustable-Rate Mortgages

While fixed-rate mortgages offer stable monthly payments, adjustable-rate mortgages (ARMs) can sometimes be a better option, especially if you plan to sell or refinance the home before the introductory period ends. ARMs typically have lower initial interest rates, which can result in lower monthly payments in the short term.

Debunking You Should Always Pay Off Your Mortgage Early

While paying off your mortgage early can save you money on interest over the life of the loan, it's not always the best financial decision. If you have high-interest debt or have not yet maxed out your retirement savings, it may be more beneficial to allocate extra funds towards those areas before paying off your mortgage early.

Debunking Refinancing Is Always a Good Idea

While refinancing can potentially lower your monthly mortgage payments or shorten the loan term, it's important to consider the closing costs and how long you plan to stay in the home. If you're not planning to stay in the home for an extended period, the cost of refinancing may outweigh the potential savings.