If you have ever financed a home, you have probably heard these mortgage myths. Let’s dig a little deeper and set some of these misconceptions straight.
- My lender will use my good credit score and ignore my spouse’s bad score. Sorry, but that is not the case. When figuring your credit score, the lender will average the 3 scores from Equifax, TransUnion and Experian for each borrower. If your co-borrower has a lower score, that is the one that will be used to determine your interest rate which could drive your rate up or keep you from getting the loan altogether. In rare cases, there are exceptions to this rule and the higher score can be used, but it’s very uncommon. Discuss your options with your lender.
- I will get the rate quoted by my lender. When you first start the pre-qualification process, you will be quoted the current interest rate. However, these rates change often. This could be good or bad. Rates may drop while you are house hunting which would be great for you. On the other hand, they could increase causing you to have a higher interest rate. In order to lock in on your rate, you will need to have already found the property you wish to purchase. Remember to keep in touch with your lender while you are shopping for your home to stay up-to-date on the current rates.
- I need to get a fixed rate mortgage. Several years ago, during the recession, home buyers were afraid to go with an Adjustable Rate Mortgage (ARM) due to the constant increase in interest rates which could cause their monthly payments to increase dramatically. Because of this, everyone chose to be “safe” and get a fixed rate mortgage. The problem borrowers run in to with the fixed rate mortgages are higher interest rates. Consider the time you plan on keeping the loan. Would you benefit from a 5 or 7 year ARM? Discuss these options with your lender.
- My real estate agent doesn’t care which lender I use. While it’s true that you are free to use any lender you choose, your real estate agent does have their preference. They work in this industry everyday. They know which lenders do the best job, know the ins and outs of the local market, and are out to work hard for their clients. If you don’t have your heart set on a certain lender, ask your agent. You can be sure that they will have your best interest in mind and will refer you to a lender that will best meet your needs.
- If I don’t have a 20% down payment, I will be required to have mortgage insurance. Yes, in order to avoid paying mortgage insurance, a 20% down payment is best. If this causes a financial burden, you can discuss the option of having a first and second mortgage with your lender. The first mortgage will cover 80% of the purchase price while the second mortgage picks up the remaining balance giving you a way around the PMI (primary mortgage insurance).
Keep in mind that your lender is the best one to discuss all of the options with you. They want the purchase of your new home to go smoothly and for you to be completely satisfied with their services. When you get in with a lender you feel that you can trust, your whole buying experience will be much more enjoyable.
We have several lenders that we choose to work with in the Denver area. For a list of our preferred partners, click the link below. We would love to discuss your home buying options with you and to help you find the lender that best suits you. Give us a call TODAY at 720-593-2014 to get started on the home buying process and making your dreams of owning a home/buying a new home come true!