If you’re considering a mortgage, there’s a lot you need to know. You’ll want to understand the different types of mortgages available, as well as the pros and cons of each. You’ll also need to know about the mortgage process, from application to closing.
But perhaps most importantly, you’ll need to know the truth about mortgages. In this article, we’ll dispel some of the most common myths about mortgages, and help you understand what you need to know to make the best decision for your situation.
Myth 1: You Need a 20% Down Payment
One of the most common myths about mortgages is that you need a 20% down payment to qualify. While it’s true that a 20% down payment will generally get you the best terms on your mortgage, it’s not a requirement.
There are programs available that can help you buy a home with as little as 3% down. And while you may pay a higher interest rate or private mortgage insurance (PMI) with a lower down payment, it’s still possible to qualify for a mortgage and become a homeowner.
Myth 2: Mortgage Interest is Not Tax-Deductible
Another common myth about mortgages is that the interest you pay is not tax-deductible. This is simply not true. The interest you pay on your mortgage is tax-deductible, up to a certain amount.
For 2019, the limit is $750,000 for married couples filing jointly, and $375,000 for single filers. So if you’re paying interest on a mortgage that exceeds these amounts, you’ll still be able to deduct the interest you paid on the portion of the loan that falls within the limit.
Myth 3: Mortgage Pre-Approval Means You’re Guaranteed a Loan
Many people believe that getting pre-approved for a mortgage in Michigan or other states in the US means they’re guaranteed to get a loan. But this is not the case. When you’re pre-approved for a mortgage, it means the lender has looked at your financial information and believes you’re a good candidate for a loan.
However, it’s important to remember that things can change between the time you’re pre-approved and when you actually apply for the loan. Your financial situation could change, or the lender’s guidelines could change. So while being pre-approved is a good step in the right direction, it’s not a guarantee that you’ll ultimately get the loan.
Myth 4: You Need Perfect Credit to Qualify for a Mortgage
Another common myth about mortgages is that you need perfect credit to qualify. While it’s true that having good credit will generally get you better terms on your mortgage, you can still qualify for a loan with less than perfect credit.
There are programs available for people with less than perfect credit, and while you may pay a higher interest rate or have to put down a larger down payment, it’s still possible to qualify for a mortgage.
Myth 5: Mortgage Refinancing is Always a Good Idea
Many people believe that refinancing their mortgage is always a good idea. But this isn’t necessarily true. While refinancing can save you money, it’s important to consider the costs of refinancing, as well as the length of time you plan to stay in your home.
If you don’t plan to stay in your home for long, or if the costs of refinancing are high, it may not make sense to refinance. But if you’re looking to save money on your mortgage and you plan to stay in your home for the long haul, refinancing could be a good option.
The Bottom Line
When it comes to mortgages, there are a lot of myths and misconceptions out there. But if you’re armed with the right information, you can make the best decision for your situation. Keep these truths in mind when considering a mortgage, and you’ll be on your way to becoming a homeowner.