Misconception No. 1: Your interest rate reflects the true cost of your mortgage.
Your annual percentage rate (APR) is actually the figure that represents the true cost of your mortgage. It is inclusive of your interest rate, points, mortgage insurance (when applicable) and other fees, including mortgage default insurance and lender fees. It does not include the cost of your homeowners insurance policy. The APR is typically higher than your interest rate because it incorporates the rate and the fees. In fact, when signing your mortgage approval, have a look at your APR instead of the interest rate because it gives a better sense of the total cost over the life of the loan.
Misconception No. 2: Mortgage rates are only released once per day.
Mortgage rates for all types of mortgages can change frequently, sometimes dramatically, throughout the day. Because of the rapid changes in mortgage rates and a lender’s ability to control what is offered, this is why it’s important to work with an experienced broker that has access to top lenders rate discounts.
Misconception No. 3: I must get my mortgage through the same lender I was pre-approved with.
A pre-approval is a conditional agreement that estimates the size of the home loan a lender would fund for you. It typically involves income verification and a credit check. However, you are under no obligation to proceed with the lender that gave you the pre-approval. For most of my clients, we can often have more than one pre-approval in place for you so you are protected if rates drop with another lender.
Misconception No. 4: You will almost always get the best mortgage interest rates at the bank where you do your everday banking.
While some banks do give their customers discounts, it’s unlikely your bank will offer the best interest rate available simply because you bank there. To get a competitive mortgage rate, work with a mortgage broker you trust so they can shop all lenders on your behalf and compare not only rates but terms as well.
Misconception No. 5: When taking out a mortgage with your spouse, lenders will look at each of your credit reports equally when determining the interest rate you qualify for.
When applying jointly for a mortgage, lenders will review each of your credit reports most commonly with Equifax and Trans Union. Each lender views credit differently, some will look at the primary applicants score more than the co-applicant and others have an average scoring system. I will know immediately by looking at your credit score and report which lender will be the best fit. Sometimes this can determine the best choice.
Misconception No. 6: You cannot get a mortgage with less than a 5 percent down payment.
It is a common misconception that you need to put down 10 percent, 15 percent or even 20 percent on a home, especially in light of the recent housing crash. But with as little as 5 percent down, you can often can be approved for a mortgage and pay mortgage default insurance in lieu of a higher down payment. This premium gets added on to your mortgage amount. In order to avoid it all together, you need 20% down. With some banks, you can even borrow the down payment.
When in doubt, call with any questions, We are here to help!
