For many Americans, their ultimate financial goal is owning a home. If you are working toward purchasing your first home, you might become defeated by some of the information you were told by family or read online. Fortunately, many of these obstacles are based on misinformation and outdated untruths about the mortgage process. Here are a few common myths about securing a mortgage that you should not believe.
You Need Perfect Credit to Secure a Mortgage
One of the most pervasive myths about securing a mortgage is that you need a flawless credit history and credit score to be approved. In reality, there are mortgage options available for people with less than perfect credit. In these cases, however, you might not have access to an optimal interest rate or be able to access as large of a loan as someone who has better credit.
If your credit is not ideal and you have been denied in the past because of your credit score, your best option is to try and raise your credit score before you reapply for a mortgage. There are several ways you can do this. For example, check your credit report for any inconsistencies, pay all of your bills on time, and pay off any old debt that is dragging down your credit score.
Shopping Around With Multiple Lenders Will Damage Your Credit Score
When you apply for most credit cards, car loans, and other types of credit, the lender will pull your credit report. Unfortunately, when your credit report is pulled too often, it can actually lower your score. Applying for mortgages through several lenders will not have this type of impact on your credit score.
Instead, mortgage lenders will perform something called a soft pull of your credit report. This allows the mortgage lender to peek at your credit report without the pull being reported. Applying with several lenders will actually allow you to secure the best rate and find the best lender.
Income And Credit Are the Only Factors Lenders Will Consider
Finally, while your credit score and income are two major factors lenders will examine, they are not the only two points the lender will consider. The lender will also consider the size of your down payment, your debt-to-income ratio, and your work history when you apply for a mortgage.
Applying for a mortgage can be confusing and there are several common myths and misconceptions about the process. Don't hesitate to contact your lender with any questions you might have about applying for a mortgage.