1. Your interest rate reflects the true cost of your mortgage.
Your annual percentage rate (APR) is actually the figure that represents the true cost of your mortgage. It is inclusive of your interest rate, points, mortgage insurance (when applicable) and other fees, including origination and underwriting fees. The APR is typically higher than your interest rate because it incorporates the rate and the fees. In fact, when shopping for a mortgage, it is best to compare loans based on APR instead of the interest rate because it gives a better sense of the total cost over the life of the loan.
2. Mortgage rates are only released once per day.
Mortgage rates for all types of mortgages can change frequently, sometimes dramatically, throughout the day.
3. All lenders are required by law to charge the same fees for appraisals and credit reports.
There are no laws that require lenders to charge the same fees for services such as appraisals or credit reports.
4. I must get my mortgage through the same lender I was pre-approved with.
A pre-approval is a conditional agreement that estimates the size of the home loan a lender would fund for you. It typically involves income verification and a credit check. However, you are under no obligation to proceed with the lender that gave you the pre-approval.
5. You will almost always get the best mortgage interest rates at the bank where you have a checking account.
While some banks do give their customers discounts, it’s unlikely your bank will offer the best interest rate available simply because you bank there.
6. When taking out a mortgage with your spouse, lenders will look at each of your credit reports equally when determining the interest rate you qualify for.
When applying jointly for a mortgage, lenders will pull your credit scores from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. They’ll then take the middle score of each set and use the lower of the two to help determine your mortgage interest rate. This means that the least creditworthy borrower will have the greatest effect on your monthly payment. It does not matter who the primary or secondary borrowers are.
7. You cannot get a home loan with less than a 5% down payment.
It is a common misconception that you need to put down 10%, 15% or even 20% on a home, especially in light of the recent housing crash. But with as little as 3.5 percent down, you can often obtain a mortgage through the Federal Housing Administration (FHA). FHA loans have become a popular loan option for those who may not have a large down payment or have blemishes in their credit history. FHA loans are available to everyone, not just first-time home buyers. There are also alternative loan programs through other agencies, including the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA). These loans also require little-to-no money down.
8. If you go through a short sale or foreclosure, you must wait 7 years before getting another home loan.
No, not true. If you’ve had a short sale or foreclosure and wish to purchase a home right away, there is a loan program available, a FHA for those that are 1 day out of closing on their short sale.
9. If you are underwater on your home loan, you are unable to refinance.
The Home Affordable Refinance Program (HARP), is available to homeowners who have a loan backed by Fannie Mae or Freddie Mac. The second program, FHA Streamline Refinance, has recently been modified to help homeowners with loans insured by the Federal Housing Administration (FHA). Both programs help homeowners refinance into lower interest rate loans and may help dramatically lower payments without very much cost to the borrower.
10. You can only refinance your home loan once every 12 months.
You can refinance as frequently as you’d like so long as you do not take cash out when you refinance and are just refinancing to lower the interest rate and/or term of your mortgage. The rule of thumb is to wait until the difference between your current interest rate and the available interest rate would save you enough money each month to cover the costs of refinancing in 2 years. The amount of time that you plan on being in the home should be considered, as well. In general, refinancing will be more financially beneficial the longer you are in the home.