With increasing home values more homeowners are becoming
eligible to refinance their home mortgage. However, before you jump into
refinancing your home, make sure you educate yourself on some of the most
common mortgageÂ myths.
Mortgage Myth # 1 â€“ You can find an accurate total cost of
your mortgage by using the interest rate true of false
The best way to find the cost of your mortgage is through
the annual percentage rate. The APR includes your points, interest rate, and
other fees. Just about every applicable fee falls under the umbrella of an APR
except your homeownerâ€™s insurance policy. Many lenders advertise based on an
interest rate, which is misleading because itâ€™s the APR that better represents
what youâ€™ll be paying, not your interest rate. When you are comparing different
mortgages, make sure to study the APR.
Mortgage Myth # 2 â€“ Mortgage rates are revealed and made
official once a day
Mortgage interest rates can fluctuate throughout the day,
much like a stock or bond does. A mortgage is a security sometimes there is
large movements in the markets that will cause changes to mortgage rates. It is
recommended to get multiple loan quotes because frequent changes in the
lenderâ€™s supply as well as market rates can turn a great deal into a bad one.
Mortgage Myth # 3 â€“ The law requires all lenders to charge
the same fees for quoting services
Simply put, there is no regulation or law that standardizes
the fees lenders charge. This isnâ€™t necessarily a bad thing: Lenders often
waive fees to gain a leg up on their competitors. When looking at your Good
Faith Estimate review the Lenders or Mortgage Brokers origination charges. This
will be found in Box A of your GFE, and include all fees being charged to the
borrower. Part of smart shopping includes comparing these types of fees.
Mortgage Myth # 4 â€“ Whoever pre-approves me must also
provide my mortgage
You donâ€™t have to get a mortgage with the company that
pre-approves you. It is only a handshake agreement that states how large of a
home loan can be covered by the lender. It is recommended to get multiple loan
quotes before going on to the next step.
Mortgage Myth # 5 â€“ Having a checking account with the bank
ensures the most favorable rates
Sure, itâ€™s possible to receive a discount or a
â€œcustomer-appreciativeâ€ rate on your mortgage if you bank with the lender.
Banks are in it to make money too, so itâ€™s very unlikely. If youâ€™re concerned
about getting the best possible rates, seek multiple quotes, and choose the
best deal you are offered.
Mortgage Myth # 6 â€“ Lenders will consider yours and your
spouseâ€™s credit scores equally when determining an interest rate
Better hope your spouse has good credit: Banks will consider
multiple credit reports from both borrowers, choose the median score for each,
and then take the lower score of the two. Ultimately, whoever has the weaker
credit score on average will affect the interest rates more.
Mortgage Myth # 7 â€“ Your down payment must be higher than 5
percent to secure a home loan
You can actually secure a home loan with as little as a 3.5
percent down payment. The Federal Housing Administration provides assistance to
those who need help securing a home loan. So do not get discouraged!
Mortgage Myth #8 â€“ Short sales or foreclosures require you
to wait at least 7 years before securing another home loan
If you buy a home after a short sale, depending on the down
payment and loan type you choose, youâ€™ll need to wait about 2 to four years. A
foreclosure requires you to wait 3 to 7 years before being able to secure
another home loan. It takes a while to rebuild your credit score to a level
that allows lenders to loan you money.
Mortgage Myth # 9 â€“ If you canâ€™t keep up with your current
home loan, you cannot refinance
Millions of homeowners who are having trouble with their
current mortgage can refinance using a special government program. The FHA
Streamline Refinance has been changed to help homeowners with loans that are
insured by the Federal Housing Administration. The Home Affordable Refinance
Program is available to assist homeowners with loans supported by Fannie Mae or
Freddie Mac. Each program helps homeowners refinance into a lower interest
rate, thus lowering mortgage payments without putting additional stress on the
homeowner. There are some useful tips for homeowners who fall behind on their
First off, donâ€™t ignore the problem. The higher the expenses
that pile up the harder it is to get help with your loan, unnecessarily
increasing the chances that you lose your house.
Be pro-active and get in touch with your lender as soon as
you find yourself with problems paying the mortgage. They donâ€™t want to take
your house any more than you want to lose it; they provide options to assist
mortgage holders through tough times.
Make sure youâ€™re aware of your rights. Gather all documents
related to your loan and go over them. Make sure that any actions your lender
makes are within the terms of service agreed upon with the mortgage.
Other than obvious changes like limited spending or
liquidating assets, the last thing you need to know is to avoid â€œforeclosure
prevention institutions.â€ You donâ€™t need to waste money for foreclosure
prevention advice (which will be things like â€œspend lessâ€). Some companies may
contact you saying they can negotiate a better deal with your lender. Even if
itâ€™s legitimate, it doesnâ€™t mean there isnâ€™t some large fee involved.
Mortgage Myth # 10 â€“ Homeowners can refinanceÂ once a year
If one has a conforming loan backed by Freddie Mac or Fannie
Mae, they can refinance as many times as they would like providing that they do
not take any equity out. As long as the homeowner is refinancing to lower the
interest rate or length of their mortgage, they can refinance as many times as
frequently as they like. The best thing to do is waiting until the difference
between the current interest rate and the interest rate youâ€™ll receive through
refinancing is enough that it would save the homeowner money each month to
cover the cost of refinancing in three years. The length of time that a
homeowner plans on living in the home should be taken under consideration. The
benefits of refinancing grow the longer the homeowner owns the home. The best
way to measure all these calculations is with a refinance calculator. Using a
refinance calculator can help you decide when you should refinance, and how
long it would take to break even given the rates provided. The real estate
market is starting to show signs of improvement. Itâ€™s a great idea to
re-acquaint you with the ins and outs of mortgages!
We are here to educate and set home mortgage borrowers straight.
Know the commonÂ mortgage myths , use
refinance calculator and know when to refinance. Should you have questions,
please give us a call or visit www.loancityhomeloans.com