10 mortgage misconceptions debunked

Posted at 5:36 AM, Dec 01, 2015
and last updated 2015-12-01 07:36:17-05

Housing experts I’ve spoken with are cautiously optimistic that the current recovery is a real one. So sellers and buyers have a reason to be happy but there are some commonly held beliefs that we need to debunk.

There is so much to know when it comes to the housing market. If only there were someone to sort out the rumors from reality.

Don Hagan with Desert Schools Federal Credit Union, can you help?


Housing misconception number 1 - Owning is Cheaper than Renting:

“It's not always the case. It's one of those situations where like anything important you need to do some research with it.”

In other words, your financial situation may be different from your neighbor’s.

Misconception number 2 - The Asking Price is the Selling Price:

“It's not a take it or leave it kind of scenario.”

So there’s wiggle room with the right negotiator.

Misconception number 3 – To Own a Home, You Must Have PERFECT Credit:

“It's good to have good credit.”

Don Hagan says that anything above 640 in your FICO score is basically in the home-buying zone.

Misconception number 4 – Pre-Approval is the Same Thing as Pre-Qualification:

“No, they're not the same.”

The former gets into specifics of debts and income while the latter keeps it general.

Misconception number 5:

“Folks need at least 20 percent down payment to buy a home.”

Not true, says Don Hagan. Some loans need as little as three percent down.

Misconception number 6 – Closing Costs are Covered By the Seller

“Doing all of that [buying a home] has some fees and costs associated with it.”

Misconception number 7 – The Down Payment is the Only Up-Front Cost:

“Collectively, those things might total 5%”

Those things, according to Hagan, include down payment, fees, taxes, etc.

Misconception number 8 – Inspected Repairs Take Care of Themselves:

“It is something that you have to, kind of, before you get into it be aware that there's possibilities.”

The possibilities Hagan is talking about are those for negotiation of costs connected to the repair inspections.

Misconception number 9 – All Real Estate Agents are the Same:             

“There are some good ones. There are some great ones. They all provide different service levels.”

In other words, make sure you do your own research.

Misconception number 10 – Debt to Income Can Make or Break the Deal

This can be the case but Don Hagan told me that as long as your mortgage payment equals less than 28% of your gross monthly income, you should be in good shape.