Top Mortgage Myths (Debunked)
Many home buyers mistakenly think the mortgage process is a simple one. They base their views on other peoples’ experiences, their own experience, from financial news, and even from TV shows. The fact is, there are many details that go into the mortgage process, which is something your Milton mortgage broker can explain to you.
Something else that makes things difficult is the number of mortgage myths out there that people believe to be true. Some of these myths can create obstacles when you are trying to find the best home for yourself. We will debunk the 4 most shocking mortgage myths out there.
Most believe that you can’t get a mortgage unless you make a 20% down payment, however, this is not the case. While it may be ideal to have that 20% down payment, there are a number of mortgage loan programs that will allow for much less. The only downside is that paying less than 20% will mean you have to pay for private mortgage insurance.
Lowest Interest Rate
Another myth is that the best mortgage will be the one that has the lowest rate of interest. In reality, when shopping around for anything, the cheaper option is not always the best option and the same goes for mortgage loans.
There are other fees, aside from the interest rate, that can vary quite a bit from one lender to the next. The advice here is to speak with not just one Milton mortgage broker, but three at least. Make sure you ask the lender for a breakdown of all the costs involved, not just the interest rate. You need to know exactly what you are paying for so that there are no surprises down the road.
Pre-Approval and Pre-Qualification Are One in the Same
This is definitely not the case. Basically, pre-qualification is the conversation that you have with your lender. It does not mean you are pre-approved.
Pre-approval is when the lender gathers all of your necessary documentation, such as pay stubs, tax returns, bank records, and more. It also entails creating the loan option that is best for you and submitting your file for review by an underwriter.
It then needs to go through formal underwriting at the time you purchase the property, however, you will get a letter from your lender showing you are pre-approved for a certain amount. It’s that letter that puts you in the best position to buy that home when you find it.
Adjustable Rate Mortgages Are Risky
After the financial crisis, adjustable rate mortgages got a bad reputation. This is because they offer you a lower interest rate for a fixed period of time, usually around 5 years. After that, the rates will change based on the market conditions, which means it could potentially shoot way up. It was for this reason that many homeowners found themselves unable to afford their current loans that they had no problem paying before the interest rates rose.
It does have benefits though. Should you be planning on moving within those five years, an adjustable rate mortgage is a good choice, because you’ll be gone long before the rates adjust to something higher. During that timeframe, you will have saved loads on interest rates.
It’s important to not believe everything you hear in regard to mortgages. The best thing to do is to visit a Milton mortgage broker and get the facts, as well as the best mortgage package for you.