Canada
US
You are now leaving our website and entering a third-party website over which we have no control.
For many people, the American dream includes homeownership, yet countless Americans believe purchasing a home is beyond their reach. “But that’s often not the case,” says Michael Innis-Thompson, Head of Community Lending & Development and the Fair Lending Center of Excellence at TD Bank.
According to Michael, many people simply assume they can’t qualify for a mortgage needed to buy a home. “In effect,” he says, “they self-select into the ‘not-me’ category, often based on untrue information.”
Here are the five most common home buying myths Michael has identified through his role at TD Bank.
Myth 1: A 30-year mortgage with a fixed interest rate is the safest and best option
There are different loan programs that may offer appropriate options for you. “Not everyone buys a home intending to live there for 30 years, so for many people, it makes sense to evaluate which loan option is best for you given your individual financial goals and the mortgage interest rate environment. However, that decision should be made after speaking with a trusted, knowledgeable mortgage professional," Michael says.
Myth 2: To qualify for a mortgage, you must be debt-free and have a 20 percent down payment
Many lenders offer low-down payment options. Additionally, lenders look at several criteria to determine your ability to pay back a loan. Moreover, depending on your income, you may qualify for Down Payment Assistance Programs in your area. “Don’t sell yourself short,” Michael says. “If owning a home is your dream, talk to a loan officer – there may be a way to help make it happen.”
Myth 3: Mortgage qualification requires a high credit score
Banks know life can get challenging sometimes, Michael says, and credit scores can suffer long-term consequences. A high credit rating certainly helps when applying for a mortgage, but great credit is not an absolute requirement. “In addition to low-down payment options, many lenders offer mortgage products that allow for more flexible credit parameters. That's why it's important to shop around and do your homework before self-selecting out of the process."
Myth 4: It’s cheaper to rent than to own
Whether you’re renting or buying, every month your money is going into someone’s pocket. When you own your home, the pocket you’re filling is in essence yours. “The longer you own your home, the more equity you build up, which is a great path to creating generational wealth,” Michael says. “As a borrower builds equity, it can allow them the opportunity to start a business, consolidate high-interest debt or improve their overall financial standing."
Myth 5: You can’t qualify for a mortgage if you previously lost your home
Many people are under the impression that they can’t own another home if they lost their previous home due to financial hardship, including foreclosure, bankruptcy, or a short sale. But with re-established credit, it’s possible to take advantage of a wide variety of loan options. That's why speaking with a mortgage professional early on is critically important.
Don’t sell yourself short
Michael suggests that it is always beneficial to at least consider the possibility of home ownership and learn about what is available for your specific circumstances. “The most important thing to know about purchasing a home is that there are plenty of options to suit a wide variety of borrowers."
Read on to learn more
No matter where you are on your financial journey, we’re here to help. Explore our financial education tips, tools and resources so you can feel prepared for it all.