Mortgages can be complex, and if you’ve never gotten one before, you are unlikely to fully understand the process or the industry. This could lead to you making big mistakes on your application or being surprised when you get an offer much lower than you were expecting. Here are a few of the most common misconceptions about mortgages:
- Your lender will only look at your best credit score. Did you know that most people actually have three credit scores? They are reported by Experian, TransUnion, and Equifax, and those scores are very unlikely to be identical. Your lender looks at the lowest score of the three. If you are applying for your home loan with another person, they will also only look at the lowest score out of your two scores. Keep that in mind if your spouse or partner has a low credit score.
- You will always get the rate you were quoted. The truth is that while you might get the rate you are quoted, daily changes in rates (because of trading mortgage bonds) mean there is going to be a fluctuation in what you actually receive. Your rate will not lock in until you actually buy the home.
- A fixed rate is better than an adjustable one. Everyone preaches the benefits of fixed rate mortgages, and for many buyers, they are the better choice. But they are not necessarily better for every single buyer, especially if you are only planning on being in the home for a couple of years before you sell it again. If you are planning on selling before your rate even has a chance to change, it might actually be cheaper to choose an adjustable rate.
- Real estate agents won’t care about where you borrow from. Your agent wants you get a good rate and a good loan, so they can sell you a house. While they are not allowed to take a fee for referring you to a lender, they can make recommendations about who to work with.
- You always need mortgage insurance. On the contrary, if you buy the home and put less than twenty percent of the price down, you could avoid having to purchase mortgage insurance, making the overall costs of buying your home much lower.