When you shop for a mortgage, you definitely don’t want to be among the million consumers who fall for mortgage myths. Familiarize yourself with the following myths to help ensure that you obtain the best mortgage possible.
The best mortgage loan is the one with the lowest interest rate.
It is always tempting to pick the loan with the lowest interest rate- BUT, beware! This could be a mistake. When you shop loans, there are many things to consider.
Start with the comparison rate, which will help you to understand the true cost of the loan. The comparison rate will provide you with the information on any upfront fees as well as any ongoing fees that you are responsible for during the life of the loan. For instance, some loans may offer a low interest rate for a specific period of time, and then increase, while others are initially low and then require a balloon payment.
The best mortgage loan is a 30 year loan.
Among homeowners a 30 year loan is the most popular choice and many homebuyers naturally assume it is the best. With a 30 year loan the monthly payment is lower than that of a 15 year mortgage, and therefore is most often a more attractable type of loan. This doesn’t mean that they are or not the best. It all depends on your situation. Consider the time that you will be staying in your home. Most homeowners typically stay in their home for an average of nine years. Statistics for first time homebuyers show a shorter period of time. For some homebuyers, an adjustable rate mortgage may be the best choice in a loan. With an adjustable rate mortgage the loan begins with a fixed rate period and after a set amount of time, the interest rate resets. Many times the interest rate is lower than a 30 year mortgage rate at the start of the loan, which makes the monthly payments lower. When the interest rate is adjusted, the monthly payment is determined by the balance of the loan. If money is applied to the principal then the monthly payment may be lower.
My credit is terrible, no lender will grant me a loan.
Granted, your credit score and rating will influence your eligibility and your loan type, but, bad credit does not mean that you will automatically be denied a loan. With bad credit you are a higher risk to the lender and chances are the loan you are offered will not be at a great interest rate. The best situation here is to be honest with your lender prior to them pulling your credit report. Lenders are typically willing to help their clients to obtain a loan and willing to work with borrowers of all levels.
I’ve been preapproved for my mortgage loan, I am guaranteed the loan.
This is definitely a myth and one that is a common mistake among homebuyers. Just because you are preapproved for a loan does not mean that the loan is a sure thing. Why? A lot can happen from the time that you were preapproved to the time of the actual loan. If your credit has been negatively impacted in some manner, this could result in denial of the loan. Once you have been approved don’t make any major purchases or apply for new credit accounts. Also, be sure to keep your credit as clean as possible.