Buying your home is quite an overwhelming process but this process becomes frustrating when people start receiving mixed and inaccurate information about mortgage and finances from different sources. Each lending source has its own set of rules and principles. It is important to seek the guidance of an experienced real estate agent to understand this process. In this article we’ll discuss five myths that we often hear from people who are getting a mortgage.

  1. Pay off your mortgage early

Stop believing on this myth as soon as possible. Paying extra in order to pay off your mortgage early is not a wise move. Only banks can benefit from your this move. Paying extra means banks will have a continuous income stream from you so that they lent out your money to someone who needs mortgage. Therefore banks ‘actually’ don’t want you to pay off your mortgage early. Therefore paying extra will cause you nothing but severely reduces your cash flow.

  1. Home equity enhances net worth

Home equity does not increase your net worth. Home equity is just the amount you pay off of your mortgage.

  1. Financial Security

It is considered that one can become financially stable by paying off mortgage early which is not true. Financial security is obtained by having assets that can generate cash flow and cover liabilities.

  1. Pre-Approval

Many borrowers think that once they approved for mortgage they don’t have to worry about any other thing. However this is not just the case many lenders check your credit score even few days before mortgage closing. Your credit score plays an important in getting you mortgage and it should be maintained throughout the mortgage process.

  1. 23/36% Rule

Although your credit score plays an important in getting your mortgage another thing that lenders examine is your monthly income. Before they decide that much money they should borrow you and even before approving your mortgage this rule is kept in mind. They call it 28/36% rule, it means that they will examine your monthly income and will make sure that your monthly mortgage payment shouldn’t exceed 28% of our monthly income and your monthly debt payment shouldn’t exceed 36% of your monthly income.

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