by Myles Biggs
Few words in the English language stir up the
same cocktail of mixed feels as this word does. Perhaps this is because mortgages
surround, what is for many, the largest and most important purchase of a
lifetime. It may also be because, like many areas of the housing market, the
mortgage industry is fraught with misconceptions and false understandings.
Thankfully, Zillow recently compiled a list of the most
common misconceptions based off of their recently released 2013 Mortgage IQ
Survey. The following, abbreviated information will act as a solid launching
point for further, more in depth research.
Some of the most common misconceptions are:
Interest Rates reflect
true mortgage cost: Your annual percentage rate (APR) – and not your interest rate – is the number that best represents the true cost of your
mortgage. Therefore, when shopping for a mortgage, it is best to compare each
loan based on the APR and not the interest rate.
Mortgage rates are only released once
per day: Mortgage rates change frequently, and sometimes dramatically,
throughout the day. Because of this turbulence in the market, it is wise to get
multiple quotes on multiple loans.
All lenders are required by law to
charge the same fees for appraisals and credit reports: There are no
laws requiring lenders to charge the same fees for services such as appraisals
or credit reports. Therefore, just like everything else, if you want the best
price, it is important to shop around.
You must get your mortgage through the
same lender that gave you pre-approval: You are in no way obligated to
proceed with a lender that has given you a pre-approval.
Your current bank will almost always give
you the best mortgage interest rates: Some banks do offer their
current customers discounts, however that does not mean those rates are the
best available. To be sure you are receiving the best deal possible, be sure to
You cannot get a home loan with a down
payment of less than 5 percent: For a down payment of as little as 3.5 percent, you
can often obtain a mortgage through the Federal Housing Administration (FHA).
FHA loans have become a popular option for those without large down
payments or with a less-than-perfect credit history. Contrary to another common
misconception, FHA loans are available to everyone and not just first-time home
It is more difficult to obtain a
mortgage for a modular home than it is for a traditional, site-built home: Lending
institutions treat new, modular construction in the same way they treat new,
site-built construction. Therefore, worries about financing capabilities should
not hold you back from pursuing a modular home project.
When it comes to home mortgages, what is the most common
misconception you have encountered? Tell us in the comments section below.