Thinking of investing in a home of your own soon? Hold your horses, the sad truth is that most homeowners get blindsided by the terms of their own mortgage loans. Many still don’t know all the basics of financing a home purchase. Do you? Results from a recent study showed that many home buyers still don’t know the answers to simple questions about mortgages and the mortgage process.
Here are the common mortgage misconceptions you need to identify yourself with:
Misconception No. 1: Your interest rate shows the true cost of your mortgage. The annual percentage rate (APR) is the figure that signifies the real cost of your mortgage. It includes your interest rate, mortgage insurance, points and other applicable fees, as well as origination and underwriting fees. It doesn’t include your homeowners insurance policy. The APR is normally higher than the interest rate because it combines the rate and fees. It is best to compare loans based on APR instead of the interest rate since it gives a better sense of the complete cost throughout the loan period.
Misconception No. 2: Mortgage Rates are only released once daily. Hate to burst your bubble, but mortgage rates change frequently for all types of loan, sometimes dramatically within the day. This is due to the quick shift in the mortgage rates and the lender’s ability to evaluate the offer. Look around for the best rates. Considering multiple loan quotes are recommended.
Misconception No. 4: I have to get my mortgage through the same lender I was pre-approved with. No, you don’t. A pre-approval is simply a conditional agreement that determines the size of the loan a lender can fund for you. It only involves income assessment and credit check. You don’t have any obligation to proceed with the lender that processed the pre-approval. Get at least three loan quotes before continuing with a mortgage. If you are a senior age 62 or older, you may also want to consider a loan from a reverse mortgage lender. These unique loans for older American’s allow for you to tap some of your equity without having to make a mortgage payment. The loan balance is due when the last surviving homeowner passes. Yes, you might leave a little less inheritance, but it can be a great way to increase some additional retirement cashflow. Tip: Compare lenders! Reverse Mortgages aren’t being run by the government and each lender charges its own rates and closing costs. Sites like ReverseMortgageReviews.org can help you compare reviews and ratings.
Misconception No. 5: If you experienced a short sale or foreclosure, you have to wait 7 years before getting another home loan. Normally, you’ll need to wait 2-4 years, depending on your down payment and the type of loan you choose. The waiting period after foreclosure takes 3-7 years before you can take another home loan. You’ll need a good credit score despite having the ability to get a mortgage. However, it’s best to check with a lender as unique circumstances can result in a different outcome.
The misconceptions above comprise the bulk of worries most would-be homeowners have, causing them to either hold off getting their own home, stop midway or just choose to rent. If you’re looking to invest in a home to call your own, then there’s mortgages from NPBS to help you choose which home loan option is best for you. They have comprehensive solutions for helping you buy your first home, refinancing your current one, and even investing to help you choose the right loan to match your investment strategy.
Choosing to invest in a permanent home and getting a mortgage and is a wise yet tough decision, so make sure you get it right the first time.
