Myth: I
need a down payment and/or perfect credit to buy a house.
Myth: When
shopping for a mortgage, the lowest quote is always
the best.
Myth: A
30 year fixed rate is always the best loan.
Myth: Brokers
are only for people with bad credit. I have good credit
and can get a better deal going straight to a bank.
Myth: When
refinancing, I need to lower my rate at least two
percentage points or it’s not worth the cost.
Myth: If
I just keep looking, I will find a lender with a
much lower rate than anyone else’s.
Myth: I
don’t want to refinance because that would mean starting
all over on my mortgage.
Myth: I
should put down as much cash as I can afford when
buying a home.
Myth: Bi-weekly
payment plans are a great way to save money on my
mortgage.
Myth:I
need a down payment and/or perfect credit to buy a house.
Reality: With fair
credit, you can buy a home with less
down than the
required move in deposit for an apartment.
Myth:
When shopping for a mortgage, the lowest quote is always
the best.
Reality: Any quote
that appears too good to be true probably is too good
to be true. In most real estate transactions, time
is of the essence. Many mortgage companies prey on
this. The initial low quote is to peak your interest;
then rates and fees increase at settlement. Your quote
is only as good as the integrity of the company
and individual standing behind it.
Myth:
A 30 year fixed rate is always the best loan.
Reality: The average
homeowner stays in his or her house only nine years.
First time home buyers stay even less. A hybrid adjustable
mortgage that is fixed for an initial period of three
to ten years can result in lower ownership costs.
Myth:
Brokers are only for people with bad credit. I have good
credit and can get a better deal going straight to a bank.
Reality: A broker
has access to wholesale rates from numerous lenders,
so they can shop the entire market for you. Because
of this, a mortgage company can secure lower
cost financing than any local bank.
Myth:
When refinancing, I need to lower my rate at least two
percentage points or it’s not worth the cost.
Reality: As a general
rule, the higher the loan amount, the less the interest
rate needs to drop to make it worthwhile. For example,
on a loan amount of $350,000, you need only lower
the interest rate by one point to save $225 per month.
Myth:
If I just keep looking, I will find a lender with a much
lower rate than anyone else’s.
Reality: All lenders
go to the same sources for capital. There is no hidden
fountain of below-market financing. Assuming the
quote you received was made in good faith, the
only differences are due to variations
in business expenses.
Myth:
I don’t want to refinance because that would mean starting
all over on my mortgage.
Reality: Certain
lenders will make a mortgage for a requested number
of years in addition to the standard 15, 20, and
30 year notes. If you have been in your home for
two and a half years, you can get a 27 and a half
year mortgage.
Myth:
I should put down as much cash as I can afford when buying
a home.
Reality: Your home
is going to appreciate regardless of your mortgage
balance or initial down payment. In today’s market,
the tax effective interest rate on most mortgages
is below four percent. With the effects of compound
interest, even an ultra conservative investment such
as tax-free municipal bonds will result in a higher
net worth.
Myth: Bi-weekly
payment plans are a great way to save money on my mortgage.
Reality: These
plans include monthly service charges and a set-up
fee of hundreds of dollars. This is something you
can easily do yourself. With a bi-weekly plan, you
will make small payments that total one extra monthly
payment per year. Instead, divide your currently
yearly payment by twelve and send the resulting number
as an extra payment toward the principal. You will
cut the same number of years off your mortgage, and
save yourself unnecessary fees.
|
truth
about mortgages will help you make a more informed decision. 
