Obtaining a mortgage can be a complex and confusing process, and all of the myths surrounding mortgages do nothing to help.
A recent realtor.com article debunked some of the most common myths about mortgages and the home-buying process.
Myth 1: The cheapest rate is always the best option – Numerous homebuyers believe that getting a mortgage with the lowest interest rate is always the best option. However, this is not always the case; for example, if a loan has high origination fees or early payoff penalties, it may not be as good an option as a mortgage with a slightly higher interest rate—but lower or fewer fees—for the same amount of money.
Myth 2: Pre-qualification and pre-approval are the same thing – Pre-qualification and pre-approval are two separate mortgage processes. To become prequalified for a loan, all it takes is a simple conversation with a lender. The pre-approval process is a bit more involved. In order to be pre-approved you must first provide the lender with a wealth of financial information, such as pay stubs, tax returns, and bank statements. In today’s market, pre-approval is often a prerequisite for making an offer on a home.
Myth 3: Adjustable rate mortgages (ARM) are always a gamble- Specific buyers may benefit from adjustable rate mortgages; for example, if you plan to relocate within five years and the rate on your adjustable-rate mortgage does not increase before that time, you may be able to save a significant amount of money on interest.
The RED Team has a list of preferred lenders that can guide you through the entire mortgage acquisition process.