When it comes to a home mortgage, you can’t believe everything you hear.
by Myles Biggs
Few words in the English language stir up the same cocktail of mixed feels as this word does. Perhaps this is because mortgages surround, what is for many, the largest and most important purchase of a lifetime. It may also be because, like many areas of the housing market, the mortgage industry is fraught with misconceptions and false understandings.
Thankfully, Zillow recently compiled a list of the most common misconceptions based off of their recently released 2013 Mortgage IQ Survey. The following, abbreviated information will act as a solid launching point for further, more in depth research.
Some of the most common misconceptions are:
Interest Rates reflect true mortgage cost: Your annual percentage rate (APR) – and not your interest rate – is the number that best represents the true cost of your mortgage. Therefore, when shopping for a mortgage, it is best to compare each loan based on the APR and not the interest rate.
Mortgage rates are only released once per day: Mortgage rates change frequently, and sometimes dramatically, throughout the day. Because of this turbulence in the market, it is wise to get multiple quotes on multiple loans.
All lenders are required by law to charge the same fees for appraisals and credit reports: There are no laws requiring lenders to charge the same fees for services such as appraisals or credit reports. Therefore, just like everything else, if you want the best price, it is important to shop around.
You must get your mortgage through the same lender that gave you pre-approval: You are in no way obligated to proceed with a lender that has given you a pre-approval.
Your current bank will almost always give you the best mortgage interest rates: Some banks do offer their current customers discounts, however that does not mean those rates are the best available. To be sure you are receiving the best deal possible, be sure to shop around.
You cannot get a home loan with a down payment of less than 5 percent: For a down payment of as little as 3.5 percent, you can often obtain a mortgage through the Federal Housing Administration (FHA). FHA loans have become a popular option for those without large down payments or with a less-than-perfect credit history. Contrary to another common misconception, FHA loans are available to everyone and not just first-time home buyers.
It is more difficult to obtain a mortgage for a modular home than it is for a traditional, site-built home: Lending institutions treat new, modular construction in the same way they treat new, site-built construction. Therefore, worries about financing capabilities should not hold you back from pursuing a modular home project.
When it comes to home mortgages, what is the most common misconception you have encountered? Tell us in the comments section below.