Home-Buying Myths

Don’t buy into home-buying myths

First-time home buyers often turn to friends and family for advice about purchasing a home. While these sources can provide useful tips and information, they also may perpetuate some common home-buying myths.

“While family and friends may have the best intentions when sharing their purchase experiences, it is important to make sure that first-time home buyers have accurate information,” says Brian Lee, vice president and national sales manager for Ditech, a subsidiary of GMAC Financial Services.

There are many resources that first-time buyers can use for learning about the home-financing process, including attending local mortgage seminars or doing research online. Well-known mortgage lenders, such as Ditech, often have educational resources and mortgage tools on their Web sites.

So what are some common home-buying myths? Lee, who has 10 years of experience in the mortgage industry, addresses the myths and sets the record straight.

Myth 1: You need perfect credit
An individual’s credit score will significantly affect their mortgage loan approval and interest rate. Credit scores may range from 500 to 850, but the majority of scores are between 600 and 700. The higher the score, the more options you will have when looking for a mortgage. Along with your credit score, lenders will need to consider other factors before they approve a loan. Carefully review your credit report and immediately contact the credit reporting bureaus to correct any errors. You want your credit report to be accurate by the time you apply for a mortgage.

Myth 2: Owning a home is more expensive than renting
In many markets, owning can be as affordable as renting, especially when you consider the tax advantages of owning a home. Unlike rental costs, which increase over time, fixed-rate mortgages provide consistent monthly principal and interest payments for the life of the loan. As you make payments, the money will be applied toward the principal, increasing the equity in your home over time. Historically, owning a home has been one of the easiest ways of building wealth in America, as home prices generally increase over time.

Myth 3: Lenders share personal information
Your personal information is protected by federal and state privacy laws. Generally, lenders must get your permission to share personal financial information with nonaffiliates.

Myth 4: The mortgage process is too long and complicated
With the right resources, the process of buying a home and obtaining a mortgage can be simplified. Expect an experienced loan officer to review the financing process with you, define terms and address concerns to find the financing option that’s right for you. In addition, home lenders like Ditech offer a number of online resources to help simplify the home-buying process: payment calculators, appraisal tools and a glossary of commonly used mortgage terms.

Myth 5: Lenders love to make you wait
Mortgage lenders don’t enjoy making you wait, but it does take time to review your application. Although some lenders may give you a preliminary and conditional preapproval based on the information provided in an application, they will need to verify this information. This typically involves confirming employment, income and financial assets, and assessing the value of the home you’re purchasing. Other documents, such as a payoff statement, may have to be ordered as well.
Because lenders must rely on the response time of third parties, the process may take longer than anticipated. Ask your lender about what to expect when you submit an application and to keep you informed of unexpected delays.

— ARA Content

Mortgage matters
For more information about obtaining a mortgage, visit www.ditech.com.