People sometimes do not realize how complicated a mortgage process can be, let alone selecting the perfect mortgage solution that meets your financials needs. It’s no surprise that mortgage myths would be flying around, which makes it even more confusing. No worries, Perennial Funding has your back! Consider us your mortgage myth busters!
- The Adjustable-Rate Mortgage (ARMs) program is never a good mortgage solution:
Most people avoid ARMs because the interest rate change is unpredictable, however, ARMs can actually assist you in many financial aspects. One thing to keep in mind is that with an ARM program, you are given a fixed rate that will remain untouched for a certain amount of years. For many homebuyers, ARMs are a great way to save money before the interest rates move higher.
- Always agree to a 30-year fixed mortgage term:
This may apply to certain people, but not always. While a 30-year fixed mortgage term may give you a lower monthly mortgage payment, the interest rates you will probably agree to will be a lot higher opposed to a 5, 7 or 15-year mortgage term.
- There are no mortgage options for people who file for bankruptcy:
While you are required to wait for a couple of months up to two whole years, you are still able to refinance even if you have filed for a bankruptcy. While terms and conditions may vary depending on what type of bankruptcy you file, there is a light at the end of the tunnel for you. After a certain amount of time you’ll be eligible to obtain a FHA loan, VA loan and much more!
- Pre-approval and mortgage offer are the SAME EXACT thing:
A pre-approval is a step closer to your final destination, it does not mean you have received a mortgage offer. Don’t get us wrong, a pre-approval is a great thing, however you are still required to provide your credit history along with other personal financial information for review. Once you have provided all the necessary information needed, your mortgage terms/offer can then be issued.
- The home is practically yours once you receive the loan approval:
Loan approval is great news, but it doesn’t mean that the home is 100% yours just yet! The lender will be performing a credit check only a couple of days before closing to make sure that your credit has not drastically changed, which will definitely determine whether you receive your mortgage loan or not. This has been implemented since June 1st as the Loan Quality Initiative program through Fannie Mae. So make sure your credit doesn’t decline between the application and closing period.
- Great credit and income determines the loan amount you receive:
Do not be fooled by these common mortgage myths, especially this one! With a higher income, you typically acquire a higher loan amount. What most people don’t know is that the income and debt ratio is really the determining factor of what your loan amount will be.
- Everyone and anyone can 100% write off all the mortgage interest from their taxes:
While most people can include the interest they pay on their mortgage loan as a tax deduction, it might not be as much of a write off as they might have expected. This is because it all depends on your other deductions. Definitely ask your financial advisor or accountant the logistics of this process so that you can possibly save more than you actually could of as well.
- You will need the full down payment: This is totally false, the down payment is only the beginning! There are also closing costs which can be another big expense depending on the value of your home. There will be unexpected expenses during your mortgage process so make sure you have a back up plan stored away just in case.
- Pre-qualification and pre-approval mean the same thing:
A pre-qualification is a process where a potential home buyer receives information about what types of homes they will be able to purchase and what their affordability looks like. A pre-approval is completely a different application process where it actually requires your personal information. A pre-approval is a great thing, it shows a lender that you are serious are about making your purchase opposed to just “window shopping”.
- Always choose the mortgage lender with the lowest interest rate: Just because a mortgage lender offers you a low interest rate doesn’t necessarily mean that it’s your best and only option. There are additional fees that will apply along your mortgage process that you should also keep in mind. Choosing the right lender with a great reputation will be a benefit to you so remember to do your research!
Purchasing a home is typically the largest asset you will ever acquire in your life time so it is important to avoid these common mortgage myths floating around! Let’s finally set these “mortgage rumors” to rest!
Mortgage agreements are extremely confusing and complicated, which may leave you a little bewildered so it’s important that you speak to your loan officer and lender about your concerns. No one said that shopping for a mortgage would be easy, but don’t fret, Perennial Funding is here to help! Fill out our online secure form and our mortgage experts will contact you to assist you during your mortgage process. But why wait? Give us a call at (888)-496-7291 to receive the priority service you deserve.
Perennial Funding Links & Resources:
The Difference Between A 15-Year Mortgage And 30-Year Mortgage
Is The ARM Program The Right Mortgage Solution For You?