Before buying a home, most people go through the same process, which mostly involves researching for lots of information. While going through mortgage loan options, pros and cons of each type of loan, and using mortgage calculators, you may come across on some information that has very little truth to it. Mortgage myths are very common, especially online, where anyone can post information about buying a home. While some of these myths are harmless and you will probably find out the truth before buying a home, there are others which can potentially cause some serious damage, and interfere with your ability to buy a home. In this article, we will explain some of the most common and dangerous myths, to ensure that you make the best decisions when shopping for a mortgage loan.
Top 5 Mortgage Myths
- The best mortgage is the one with the lowest interest. Looking only at the interest rate when comparing mortgage loans is a huge, but common, mistake. Several other important factors should be researched before deciding on a mortgage loan. Things like the overall cost of the loan, the down payment required and the closing fees are also important, if not even more important than the interest rate. There are also the adjustable-rate mortgages which offer a low interest rate in the beginning, but which can increase significantly over the repayment period.
- Pre-approved for a mortgage loan is like already being approved. The mortgage loan pre-approval process is designed to take a simple look at your financial situation, and give you an idea about how much you can borrow. Once you find a suitable home, you will have to provide more important information about your finances, such as employment information, to your lender. Sometimes, this additional information can affect the amount of money that your lender will let you borrow, or even cause your lender to refuse giving you a mortgage loan.
- 30-year mortgages are your best choice. 30-year mortgage loans are, indeed, very popular, and probably the most common choice among home buyers, but that doesn’t mean that this type of loan is the best for you. Depending on your situation, a 15-year loan, for example, might be a better choice, even if the payment will be higher. Paying off a loan in half the time, means that you will save significantly on interest, which will make the overall cost of the loan lower, and save you money.
- Fixed-rate mortgages are your best choice. Fixed-rate mortgages may be more popular, but you should decide on which loan you want to go with, based on your situation. For example, many home buyers don’t live in the home that they bought for very long, which makes adjustable-rate mortgages a better option for them. Adjustable-rate mortgages start out with a fixed interest rate, which lasts for a predetermined period, and it’s generally lower than the interest rate on a fixed-rate mortgage loan. By getting a mortgage loan with an adjustable-rate, you will be saving money over a loan with a fixed-rate, if you don’t plan on living in the home for a long while.
- You won’t be granted a mortgage loan if your credit score is low. Credit score has a large influence on whether you receive a mortgage loan or not, the loan type, loan amount, interest rate, and the down payment. But having bad credit doesn’t necessarily mean that you will be refused when you apply for a mortgage loan. You lender will see you as a high default risk, and your loan will probably not have the best terms, such as the interest rate, and the required down payment, but your lender will be willing to help you buy a home. After all, they have only to gain if they bring in a new customer.
You’ll be encountering mortgage myths at every step when researching mortgages and the home buying process. It is up to you to tell apart myth from reality. Knowing the dissimilarity between these two can make the difference between getting a mortgage loan that you are comfortable with, or one that will cause you nothing but issues down the line. Getting the best deal is your main goal when shopping for a mortgage, so being prepared will help you avoid falling into some expensive traps, and even ruin the chances of becoming a home buyer.