1. Interest rates are the best reflection of your mortgage cost.
The true representation of the cost of your mortgage is your annual percentage rate. This includes your interest rates, points, mortgage insurance as well as other fees.
2. Mortgage rates are released only once every day.
Mortgage rates change quite frequently, even throughout the day. Due to the erratic nature of rates as well as the lender’s ability to dictate what is offered, it is essential to shop around for the best rates.
3. Lenders are required by law to charge the same fees.
No law requires lenders to charge the same fees for services such as appraisals and credit reports. Some lenders may waive these fees while others may charge higher fees, it may be advantageous to shop around to see what works the best for you.
4. You have to stick with the lender that pre-approved my mortgage.
A pre-approval is a conditional agreement that will estimate the amount of the home loan that the lender will put up for you. With that said, while it involves a credit check and verification, it does not bind you to them. You have no obligation to the lender. It is smart to get a few quotes before deciding upon one.
5. You’ll find the best rate with whomever you currently bank with.
While some banks may offer perks for borrowing from them, it doesn’t necessarily mean you will be getting the best rate. The only way to know if you’re getting the best deal is to get quotes from multiple lenders (including your bank) and pick the one that fits your needs. This is exactly why working with a broker is advantageous. We do the painstaking job of comparing your options to find one that is right for you.
6. When taking out a mortgage with a partner, lenders impartially review your credit reports.
Many first time buyers are misled to believe that both their income and their partner’s income will impact their credit reports equally, but the lower credit score of the two will largely determine your monthly payment regardless of who the primary and secondary borrower is.
7. You need to put down 20% for a deposit.
A common misconception is that you must make a down payment of as much as 10, 15, or even 20 percent on a home. That is the contrary. With an FHA loan, you can put down as little as 3.5 percent. This is a great option for buyers who may not be able to make a large down payment.
8. If your mortgage is “underwater” you cannot refinance.
If your mortgage is underwater it means that your home’s value is less than your mortgage. This could be due to several reasons, but it shouldn’t deter you from considering refinancing your home. You can refinance using one of two special government programs. These are the Home Affordable Refinance Plan and then the Federal Housing Administration Streamline Refinance. Both programs help homeowners refinance into lower interest rate loans and may help drastically lower a borrower’s payments.
9. You cannot pay off your mortgage early.
Some lenders may include a prepayment penalty. This is a clause included in your contract that may require you to pay a fee for paying back your loan before the estimated time. While these are becoming less and less common it’s still always important to know what you’re getting into before signing.
10. Your down payment includes a closing cost.
Many homebuyers save money and put it all towards their deposit, neglecting the other cost that may occur. These can include loan origination fees, appraisal and survey fees, homeowners insurance, PMI, and even attorney fees. These can add up to be thousands of dollars so it’s important to take this into confederation when putting money aside for your purchase. At Petra Cephas, we have special programs that can cover some, if not all, of your closing costs!
*Bonus* Preapproval and Prequalification are the same things.
While both are important steps to the home buying experience they are not the same. A prequalification is the first step and involves providing information to a lender to see how much you would most likely qualify for. A preapproval is the second step. It is more extensive and detailed, and involves completing an official mortgage application.
At Petra Cephas, we do the heavy lifting for you. We’re here to help you throughout the whole mortgage process and have you smiling the whole time.