Top 3 Mortgage Myths Busted!

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Whether you are ready to take out your first mortgage or you think that second mortgages might help you out of a financial crunch, it is important to keep in mind what is true versus what is myth. Here, you can learn more about the top three bad credit mortgage myths to protect yourself and your investment.

Myth #1 – You Need a Huge Down Payment to Get Home Loans

Tens of thousands of Canadians put off homeownership because they believe that they must save thousands upon thousands of dollars in order to get the loans they need. In an ideal situation, a potential homeowner will have at least 10% of the value of the mortgage saved, but not every situation is ideal.

The actual amount of the down payment that you will need to get a bad credit mortgage differs based on a number of situations. If your credit is just under the “good” mark, then your down payment might not be quite so high. Even if you have horrible credit and you seek out a private home loan, the lack of a down payment will not always prevent you from getting a mortgage. Many, many lenders work with people who have bad credit to get them loans on the down payments, too.

Myth #2 – Pre-Qualification Means the Loan Is in the Bag

Banks and lenders send pre-qualification emails and letters to those seeking loans in an attempt to entice borrowers to contact them. Many lenders are fully aware that these pre-qualification letters make people feel as if they have already gotten the loan, and all they have to do is fill out the paperwork.

Pre-qualification simply means that a lender has tentatively determined an amount that a borrower might qualify for based on the financial details provided. This is never a guarantee. On the other hand, a pre-approval is a bit different. This is a confirmed amount of money that a borrower will receive once he or she verifies all of the reported financial information. This may mean turning in paycheck stubs, handing over tax returns, and even providing receipts for funds spent on rent, utilities, and more.

Myth #3 – An Adjustable Rate is Always a Bad Idea

When people hear the term “adjustable rate”, they imagine the lender raising their interest rate from a comfortable 3.9% up to 6% or more over the course of the first few years. They assume that the term “adjustable” means that the lender can charge whatever they want, at any time, and for any reason.

The truth is that your interest rate will increase at some point if your first or second mortgage comes with an adjustable rate. However, this may occur when your income increases, or even when your children move out of the home to attend college. What′s more, it is possible that you might sell your home and move before the higher interest rates kick in. Finally, remember that some adjustable rates – even after the increases – are still lower than fixed rates.

These are the most common myths associated with a first or second mortgage, and understanding how things really work can help you make better decisions when it comes to buying a home. Don′t miss out on a great deal because of a misunderstanding.

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