We’ve all heard these excuses made by our friends and family, but are they true and should you listen to them?
“It’s hard to qualify these days, even with a good income.”, “You’ll need at least 20 percent down and have the perfect credit score.”… Yeah, yeah, we’ve all heard these excuses made by our friends and family, but are they true and should you listen to them?
These are the Mortgage Advisor Myths That Aren’t True!
While there have been some Mortgage misconceptions been floating around, being mentioned on Martin Lewis’ ITV Programme, etc. To how hard it may be to qualify to how much you should put down, it is important to learn the facts and how they apply to you.
Not knowing the facts could delay your homeownership, and the benefits you would gain by the many years to come.
If you are renting now, buying a home could be a better financial decision. Of course, that depends on several factors, such as where you live, current mortgage interest rates, and what you now pay in rent. Assuming your home appreciates in value, you’ll also gain equity. That’s money you’ll benefit from when it comes time to sell.
Aside from the financial aspect, owning your first home in the Doncaster Region means you can stay in one place, perhaps ensuring a short commute to work, or allowing kids to grow up in the same neighbourhood and stay in the same schools.
Despite the rumours, getting a mortgage advisor won’t require you to have the perfect credit or a large down payment. However, at Mortgages Remortgages – Fee Free Mortgage Advisor in Doncaster, we provide you with a FEE FREE Mortgage Advice whatever your situation.
We do recommend that you should sort out your finances out first/getting them order before you start house hunting or talking to lenders.
So, don’t count yourself out before learning the facts. You may qualify for one of many mortgage options, down payment assistance, or affordability programs once you know what’s fact and what’s not about the mortgage process and products. Here are a few common myths we’ve debunked to help you get started.
We understand, any First-Time buyers will see a home that they’ll fall in love with, but only to learn that they can’t qualify for it. It’s painful and heart breaking, but that’s why it’s important to consult with a Mortgage Advisor first before you embark on your home-buying journey.
A lender will ask you a few questions and will check your credit to ‘pre-approve’ you. This process will give you a good idea on your price range, and any hurdles you may need to overcome to secure a lower interest rate, potentially saving you thousands over the life of your loan.
Sure, you won’t need to actually apply for a mortgage until you’ve had an offer on a property accepted. But you certainly need to have scoped out mortgages before then, to check what you can afford. Different lenders will offer different amounts, but a good way of getting an accurate idea of your budget is to apply for a mortgage ‘agreement in principle’ (AIP). This is a statement from a lender that they would, in principle, lend you a certain amount of money.
Only a few people have a perfect credit score — and that’s not what lenders are looking for anyway. If you have a steady income and pay your bills on time, it may be possible to qualify for a mortgage. The minimum credit score you’ll need depends on the loan type. For example, conventional loans typically require at least 620, and FHA loans allow for credit scores as low as 500 in some cases. But remember, lenders may also have different requirements based on other factors such as your down payment amount or income.
There aren’t many 100% mortgages available, though, and they all currently require a parent or close family member to put money aside to guarantee the loan or let the lender secure a charge over their own home. They also carry a serious risk of negative equity, which is when your property’s value falls and you owe more on your mortgage than your home is worth.
This is something most first-time homebuyers hear from well-meaning parents or friends, but it’s simply not true. According to Stephen Kerrigan of, Mortgages Remortgages – Fee Free Mortgage Advisor, only one-quarter of buyers (24 percent) pay 20 percent of their home’s purchase price upfront as a down payment. Qualified borrowers can secure home financing today through many different programs with much lower down payments, such as 3% down with programs backed by Freddie Mac and Fannie Mae and 3.5% down with FHA. Some buyers can qualify for USDA and VA programs that require no down payment at all.
Many mortgages today allow the down payment to come from any source as long as those sources are documented. According to the Stephen Kerrigan, Mortgage Advisor with over 30 years’ experience, 20% of buyers used a gift or loan from family or friends.
Not only can your down payment include gifts from parents or friends, there are also grants from non-profits or other sources out there that could help, such as company-sponsored home-buying programs. If you’d like to see what’s available, you can search for down payment assistance programs in your area.
If they’re homeowners, your parents could act as guarantors on your mortgage, meaning they would have to cover any shortfall if your property was repossessed and sold by the lender.
WRONG!! The 30-year fixed mortgage is certainly a popular option, but there are many mortgage options out there. Something besides a 30-year fixed rate mortgage might be better for your needs, perhaps offering a short-term solution (and super low rate) if you know you’re only going to live in an area for a couple of years.
Because each situation is unique, you should talk with several lenders to determine the best loan options for you, taking into account your financial readiness, how long you plan to own the home, and other factors.
While getting pre-approved by a lender is considered the first step towards getting your new home loan, it does not obligate you to work with that lender once you’re ready to purchase. In fact, it’s in your best interest to shop around and compare terms from several lenders. As mentioned just above, there are many types of mortgages with options that could lower your interest rate and save you tens of thousands over the life of your loan.
Ready to look into your buying options? In addition to your local bank or credit union, or lenders referred by Estate Agent professionals or friends, you can find local lenders by calling Mortgages Remortgages to provide loan estimates. Or you can check rates with Stephen Kerrigan anonymously to compare offers from multiple lenders, all in one place.
Banks are brilliant, we love them and they make life easier for us all! But, they’re not the only option for getting a Mortgage – Mortgage Brokers and Advisors can also help! There are thousands of mortgages available, meaning that finding the right deal can be overwhelming. A whole-of-market mortgage broker can help you find the right mortgage based on your personal situation.
The interest rate you’ll pay is just one of several factors influencing the overall cost of a mortgage. You’ll also need to look at:
Type of deal: the interest rate on a discount or tracker deal could rise at any time. On the other hand, a fixed-rate mortgage guarantees that your interest rate will stay the same for a set period of time, and could be more suitable if you want your mortgage repayments to stay the same each month during that period.
Length of deal period: in most cases a fixed, discount or tracker deal will only last for a set number of years, known as the ‘initial deal period’. Afterwards you’ll be moved onto your lender’s standard variable rate of interest, which is usually much higher – meaning you should Remortgage to a different deal at that point.
Fees: many mortgages carry fees ranging from £100 to well over £1,000, making a big difference to the overall cost of the deal.
Cashback: some deals have higher interest rates but offer cash when you take out the mortgage. This can be welcome at a time when you’re spending thousands on the costs of buying a home, but do weigh up whether it’s worth it in the long run.
“HELP! I’m 29, single and self-employed. Will anyone ever give me a mortgage?”
Things are probably not as bleak as you think they are. Being self-employed does not prevent you getting a mortgage. Neither is it necessary to have three years’ worth of books to show. You can still get a mortgage with just one year’s books, although the lender options are limited. With two years’ books, 80-90% of lenders will do business with you. The criterion is whether you are able to prove you can repay. As a sole trader, your net profits will be taken into account. If you are a limited company, it will depend on your dividends and salary. The deposit level will be the same if you are employed, married or older.
“HELP! I earn less than £20,000 a year. Can I get a mortgage?”
Yes – it’s not a problem. Your outgoings and affordability will be taken into consideration, just as they would be if you were earning £50,000 a year. However, your best bet is to take advice from Stephen Kerrigan from Mortgages Remortgages – Fee Free Mortgage Advisor, who will go through your finances and work out your best option.
“HELP! I’m considering a shared ownership scheme, but I don’t really understand what that means. Can I get a mortgage?”
Shared ownership means buying a percentage share of a full property, which means that you will own a portion of it and the council or housing association will own the rest. You would obtain a mortgage just on the part you own and pay rent on the portion owned by the other party. You would have to put down a 5%-10% deposit so, for example, a 10% deposit would be £10,000 on a borrowing of £100,000. Again, it all comes down to affordability and providing evidence that you can repay. There are around 15 lenders who take on shared ownership clients. These include Santander, Virgin Money, Nationwide and Halifax.
“HELP! My friend and I are both working, but we are not high earners, so we were wondering if we could put our funds together to buy a property. Is it possible?”
Yes – provided you both have good credit scores and enough of a deposit and income to secure a mortgage. This is a subject which needs to be discussed with an independent mortgage broker or solicitor, as complications can arise if one of you wants to sell the property. Further discussions can arise with regards to how ownership of the property will be split between you, especially if one is putting in more of a deposit. Property can be owned as joint tenants or as tenants in common. If you set it up as a joint tenancy, the part owned by you passes to the other person when you die. With tenants in common, the ownership of the property can be split any way you decide and your share can be passed to a family member when you die. But, I stress, this is something, which definitely demands professional advice.