Unless you're one of the very few who have hundreds of thousands of dollars sitting in your bank account, you will need a mortgage to own a home. That makes it super important to separate fact from fiction.

"A home is the biggest investment most of us will make in our lifetimes, so understanding the mortgage process is vital," said Kazantzis Real Estate Owner and Broker Andrea Kazantzis. "Clearing up some common myths can make the process easier and a lot less stressful." 

Myth #1: I will qualify for low-interest rates

You keep hearing that interest rates are historically low levels. That is true. However, that doesn't mean everyone will qualify for low rates. The rate you get will largely depend on the health of your credit. Other factors that come into play include:

  • Size of Downpayment
  • Type of Home
  • Type of Loan

Not all lenders are equal. You will want to shop around for the best rates possible. A mortgage broker can help you in that regard if you don't want to do the leg work.

Myth #2: Getting a mortgage will be easy

If you have good credit, it may be easy. However, due to changes in lending criteria from the Federal Housing Administration, getting approved for a mortgage is a bit tougher.

Not to mention, with those low-interest rates, a higher number of people are looking to borrow money, so lenders are able to be more selective about who gets approved and who doesn't. For instance, some (not all) lenders are requiring a credit score of at least 700 and a 20% down payment. According to a realtor.com analysis, 5% to 20% of potential borrowers may struggle to get a mortgage because of these stricter standards.

If you have a lower credit score, you may want to look into an FHA loan - which are government-backed loans that have lower credit and income requirements.

If your credit score needs work, there are some things you can do to get it back on track.

Myth #3: I don't need preapproval

Finding the home of your dreams could quickly become a nightmare scenario when it slips through your fingers because you can't get financing.

It's a seller's market and getting preapproved before you start house hunting is key. Not only will it give you a better idea of how much money you can borrow - helping you narrow down the search - it also lets the seller know you are a serious prospect. If you're in a bidding war for a home, that pre-approval letter could put you over the top.

Keep in mind - prequalification and preapproval are not necessarily the same thing. Prequalification is based on preliminary information you provide a lender. Preapproval is much more accurate as the lender has verified at least some of your information.

Myth #4: Forbearance Means You Don't Have to Pay a Back a Loan

This is not - we repeat - NOT the case. Forbearance is not forgiveness. It's more of a timeout or a pause - allowing you to skip mortgage payments without late fees or marks on your credit report.

According to the Mortgage Bankers Association, due to the pandemic, nearly 8% of mortgages were in forbearance as of July. However, when the forbearance ends, those homeowners will need to work out an arrangement with their individual lenders to make up those missed payments. Some may just add the payments to the end of the loan while others will allow the missed payments to be repaid over time.

Myth #5: Everyone should refinance

As we've mentioned, interest rates are at historic low levels. So, obviously, it's worth looking at whether you could lower your monthly mortgage payment by refinancing. However, keep in mind, not everyone should refinance.

There is a cost to refinancing - about 2% to 6% of your loan. So, if your current interest rate is already low or if you aren't planning to stay in the home for a while, it may not be worth the hassle or the expense to refinance.

The mortgage process can seem confusing. However, the experts at Kazantzis Real Estate can help answer any questions you may have and will walk you through the entire process.