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Tuesday, June 18, 2013

Mortgage 101: Most common mortgage misconceptions

mortgage, home mortgage, home loan

For most Americans, the home buying process only occurs about every five to seven years.  Therefore, most prospective home buyers don't spend a lot of time educating themselves about mortgages and the mortgage process.   Buying a home can be a stressful experience but the more you know, the smoother the transaction will likely go.

The True Cost of Your Mortgage Is Reflected In Your Interest Rate

The truth is the true cost of your mortgage is reflected in your annual percentage rate (APR).  It is a comprehensive figure of your interest rate, points, mortgage insurance (if applicable) and other fees, including origination.  It does not include the cost of your homeowners insurance policy.   The APR typically is higher than your interest rate because it incorporates the rate plus the fees.

Mortgage Rates Are Only Released Once Per Day

Rates change all throughout the day.  Because of rapid changes, listen to your loan officer’s advice as they usually have a good feel for certain trends in the market.  When they recommend locking in a rate, you might want to act fast before pricing changes.

Compare Mortgage Rates Here

By Law Lenders Are Required Charging the Same Fees for Appraisals and Credit Reports

No law requires that lenders charge the same fees for Services such as appraisals or credit reports.  In fact, appraisals are often third party fees that lenders have no control over.  Some lenders may charge higher fees for these services so it’s important to make sure

Wherever You Do Your Banking Will Get You the Best Rates or Deals

It’s highly unlikely that your bank will offer the best interest rates simply because you bank there.  The best way to get competitive mortgage rate and term quotes are to talk to a few lenders and see what will make you most satisfied.

Lenders Will Only Look At One Credit Score When Determining Eligibility

In getting preapproved for a mortgage a lender will pull your credit scores from each of the three major credit bureaus: Experian, Equifax, and Transunion.  From there they take the mid score (middle of all three bureau scores) to determine your credit worthiness.  The lower the fico score, the higher rate or fees you may be charged.

You Can’t Get a Home Loan with Less Than Five Percent Down

This is one of the most common misconceptions.  It’s often thought that 5, 10, or even 20 percent down is required but Federal Housing Administration (FHA) loans can be obtained with as little as 3.5 percent down.

There are also government sponsored programs such as USDA or VA that eligible buyers may qualify for.  Both of these options require no money down as everything is financed right into the loan.

If you have a question about whether you can qualify  for a USDA or VA loan, please contact one of our licensed loan officers today.

A Short Sale or Foreclosure Means You Can’t Buy Again For Seven Years

More often than not, you can purchase within two to four years of going through a short sale.  Unfortunately a foreclosure is a little longer, more likely around three to seven years before getting another home loan.  The important thing to remember is that you will need a good credit score so start rebuilding right away so that when you’re waiting time is up you are quickly ready to purchase again.

If You Are Underwater on Your Mortgage You Cannot Refinance

There are a few really good programs that underwater homeowners can use to refinance.  The best way to know what you qualify for is to contact a licensed representative and have them run an automated value model (AVM) of your property.  Often times homeowners that are underwater can refinance without having to pay much out of pocket costs while still lowering their rate.

Contact a licensed representative about refinancing today.

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