Top 10 Mortgage Misconceptions

Myth: The cost of your mortgage is reflected only by your interest rates

The actual amount of your mortgage is represented by the annual percentage rate that you have (APR).  It includes a number of things such as your interest rates, mortgage insurance, points, and fees such as the underlying and origination charges. However, the cost of your mortgagor’s insurance policy is not included in your APR value. The APR value is better than the interest rates in making mortgage loan comparisons.

Myth: The release of mortgage rates is done only once per day

Mortgage rates are subjected to a lot of changes in just one day. Due to this and the role that lenders play in controlling rates, it is good to compare various quotes.

Myth: The law binds lenders to standardize all appraisal and credit report fees

It is impossible to bind lenders by law into charging the same price for appraisals and credit reports. This is not practical as the market is free and lenders could either decide to charge less or nothing for these services. Some may even raise the fees, thus the need to compare your options.

Myth: It is a must to get a mortgage through the lender who pre-approved your request

A pre-approval determines the amount of funding a lender can give you. Verification entails going through various financial records of the borrower. It is important that even though a lender gives you the pre-approval, you should look for three more options before settling upon one.

Myth: The bank that has your checking account gives you the best rates

The mere fact that you are seeking a mortgage through your own checking account’s bank does not mean that you will get a discount automatically. Include your bank in a list of several others as you make a choice on the best option.

Myth: Interest rates are determined equally when spouses take out a mortgage

The lenders will be looking at the credit scores of borrowers in this situation against those offered by Equifax, Experian, and TransUnion. The lower middle score of the two spouses is used, and the person who is the lesser creditworthy affects the monthly interest rates.

Myth: It is impossible to qualify for a mortgage with a down payment that is not more than 5%

The housing crash in the past few months has made people believe that the down payment values have doubled or tripled. However, the Federal Housing Administration (FHA), the United Stated Department of Agriculture (USDA) and the Department of Veterans Affairs (VA) charge 3.5% or lower.

Myth: Short Sales or Foreclosures delay subsequent home loans for seven years

The short sale may delay you for between 2-4 years while a foreclosure may make it between 3 and 7 years. However, you can still get a few exceptions on the market if you look around.

Myth: You cannot refinance if you are underwater on your mortgage

It is possible to refinance through the Home Affordable Refinance Program (HARP) and FHA Streamline Refinance.

Myth: It is only possible to refinance your loan once in a year

Fannie Mae or Freddie Mac loans make it easy to refinance if you are only doing it to lower the interest rates and not taking out the cash. You should be able to save enough money to refinance for two years. Always remember the how long you plan to keep your house.