Getting a mortgage can be a mystifying process, especially if you’ve never done it before. To make matters worse, there’s a lot of incorrect and outdated information out there to contend with. To that end, we’ve decided to set the record straight. Below are six of the most common mortgage myths. We’ve debunked them for you so that you can go into the mortgage process feeling informed.
Getting pre-qualified is the same as getting pre-approved
Though these two terms may sound the same, there is a world of difference between them. You can get pre-qualified in minutes just by answering a few questions about your financial situation. However, the pre-approval process is much more through. In this scenario, your financials are vetted by a lender before a decision is made. If you’re approved, you’re given a maximum loan amount based on how much the bank is willing to loan you.
These days, a pre-qualification isn’t worth much. Sellers, by and large, prefer a pre-approval since that’s a much more accurate representation of your ability to actually buy the home. When getting ready to purchase a home, make sure you get pre-approved and leave the pre-qualification behind.
Shopping around for lenders will hurt your credit score
While it’s true that multiple inquiries on your credit can lower your score, not all inquiries are created equal. FICO allows for rate shopping by counting all similar inquiries made within the same 30-day period as one. This means you can visit as many lenders as you’d like as long as it all happens within 30 calendar days.
And, you should shop around. Getting the best interest rate possible is important when it comes to buying a home. Even a fraction of a percentage point makes a big difference. It could mean thousands of dollars spent or saved over the life of the loan. Conventional wisdom states you should visit at least three lenders before making your final determination.