Whether you’re just considering a home loan or are already going through the process now, beware of myths that can affect your choices and decisions. By avoiding them, you’ll also avoid loan-related problems and stress. To help you out, we’re debunking a few home loan myths before you go to an authorised money lender in Singapore.
Myth 1: You Need a Perfect Credit Score to Get a Home Loan
The first common myth is that a very high credit score is required for a home mortgage. While a good credit score definitely helps your chances in getting loan conditions met – it is not the only determining factor in getting approved for a home mortgage. A lender will also consider other facets of your condition such as your income, debt-to-income ratio, job history, and loan-to-value amount. This is not to say that an average credit score guarantees approval as long as you’re doing well in other factors. Rather, this means that you won’t get automatically declined just because of it.
Myth 2: You Need a Large Down Payment to Buy a Home
Many believe that a substantial down payment is vital for buying a home. This sum is often around 25% of the home’s price. Yet it’s critical to comprehend that staking a larger amount can lower your mortgage payments. However, this strategy isn’t a one-size-fits-all solution.
Myth 3: Floating Rate Home Loans Are Always Risky
It is a home loan with a variable interest rate that’s tied to a specific benchmark. Floating rate home loans can get a bad rap because their interest rates can go up and down. But, for some people, they can be good, especially if they want to sell or refinance before the first period ends. Floating rate home loans usually begin with lower interest rates than fixed-rate home loans, so you pay less each month at first.
At the same time, think about your money and plans in the long term first before choosing.floating rate home loans.
Myth 4: You Can’t Refinance with a Low Credit Score
While it’s true that a better credit score can help you obtain more favorable terms when you refinance, a low credit score doesn’t necessarily lock everyone in their current mortgage.
If you really want to refinance, you probably should try. Your credit score will be considered, as well as your payment history and your overall ability to pay the mortgage on time. If you have some late payments on your credit report, these programs may look beyond the score and search for explanations. If you pay rent or utility on time, then they’ll think you have a history of making housing payments on time. If you have been employed in the same job for the last two years, they’ll believe your income is stable.
Myth 5: Prequalification and Preapproval Are the Same Thing
Getting ready for a loan is very important in getting a house. Prequalification and preapproval are two different things in the home loan process. Prequalification comes first and is based on information given by the borrower. It does not look at your credit rating yet but gives an idea of what you might get. Pre-approval is when the lender looks at your financial documents and credit and is set to loan you a specific amount based on it.
Conclusion
Being aware of home loan misconceptions is a must if you want to have a good home-buying experience through this means. With the right information, you can get down right away to finding the right home loan while avoiding the mistakes that both novice and experienced home buyers tend to make. We hope that your journey to buy a new home goes smoothly and conveniently as possible.
