Myth: I must have at least a 20% down payment
Probably the most common misconception when buying a home is the idea that you must put down at least 20% in order to qualify for a home loan. While there are benefits to putting more money down upfront (no PMI, lower monthly payments, etc.), it’s actually not something most lenders would consider an ultimatum. In fact, there are more options available to you as a first-time buyer than you might think! Down payment options as low as 3% are also available for the right borrowers.
Myth: I need a credit score of 700 or higher
We all know the benefits of having a great credit score, but setbacks happen, and that’s okay. Luckily, there are plenty of loan programs available (like FHA loans – more on that below) that allow scores as low as 580. Better yet, many boutique lenders offer more relaxed qualifications than most big banks which make it even easier to get approved for a mortgage loan. Don’t count yourself out just because your credit score is not as good as you would like.
Myth: FHA Loans are the only option for first-time homebuyers
When many people start thinking of buying their first home, they think an FHA Loan is their best first-time homebuyer option. An FHA loan is a popular loan for first-time homebuyers since it offers lower down payment options and is guaranteed by the Federal Housing Administration, making loan qualifying for borrowers easier.
FHA loans require just a 3.5% down payment for borrowers with a 600 credit score or higher. For these homebuyers with less-than-perfect credit, FHA loans offer the opportunity to achieve homeownership. The government backing means average FHA interest rates are typically lower than average rates for Conventional mortgages.
However, there is another option for first-time homebuyers. While FHA loans and their relaxed requirements are attractive for first-time homebuyers, Conventional loans can offer better options for those that qualify. The qualifying requirements are slightly tighter, but there are more options such as 3% down and no upfront mortgage insurance premiums, resulting in a much cheaper mortgage payment for the borrower.
Myth: My bank will offer me the best rate possible
Big banks are known for their tighter qualifying requirements when it comes to credit scores and down payments so they can filter out the less than ideal borrowers/loans in order to secure borrowers with more predictable/secure finances and often bigger loans. Contrarily, smaller lenders don’t always adhere to these guidelines. While smaller lenders typically aren’t as well known, they can offer loopholes and deliver closings faster for borrowers that big banks wouldn’t even consider, without the bureaucracy that comes with a large institution.
As a direct lender, Bluefire Mortgage Group offers competitive interest rates and fantastic loan programs that are custom tailored to your needs.
If you are thinking about purchasing a home and have any questions, please give us a call at (760) 930-0569 and one of our loan officers will assist you.