Confused about what it takes to get a mortgage in today's market? Here are the facts to dispel the two biggest myths about qualifying for one.
Myth: I need perfect credit to get a loan.
Fact: Your credit plays a significant role in qualifying for a mortgage. Generally speaking, a higher credit score can mean a better chance of getting approved for a loan and securing a lower interest rate. Good credit is important, but it's not the only thing lenders take into account. Lenders also look at 3 other Cs when deciding whether to make you a loan – your collateral, capital and capacity to pay back the loan.
While credit standards are higher now than they were a decade ago, they are actually about the same as in the mid–1990s. If you factor into today's historically low interest rates and current home prices, an affordable mortgage could be within your reach.
Myth: I need to put 20% down.
Fact: This is perhaps the biggest myth in the market. Today borrowers can get a conforming, conventional mortgage with a down payment of as little as 5%. Most homebuyers are putting down between 5 and 10%. In fact, last year nearly a third of the 1.6 million loans that Freddie Mac funded were to buyers putting down less than 20%.
And some products, such as our Home Possible AdvantageSM mortgage, require a down payment of as little as 3%. You have choices when it comes to your down payment so talk to your lender about what makes the most sense for you.
If you have a conventional mortgage, you'll have to pay PMI until you've built more than 20% equity in your home. Get the facts on PMI.
Read other posts in our Myth vs. Fact series:
- Myth vs. Fact: PMI
- Myth vs. Fact: Down Payments
- Myth vs. Fact: Mortgage Refinance
- Myth vs. Fact: 3% Down Mortgages
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