Monday, January 25, 2016   /   by Frank Littrell

What Does It Take To Get a Mortgage Loan? 5 Mortgage Myths That Home Buyers Need to Know and Understand

Getting a mortgage loan can be a much easier process when you are organized and know what to expect and what not to fear! As real estate agents, we want everything to go as smoothly as possible for you and us. We suggest you get pre-approved for a loan to know how much you can afford and what your rate will most likely be. Also read this post to inform yourself about some of the most prevalent mortgage myths you'll hear over and over again.

 

Mortgage Myth #1 - Your Best Credit Scores are Used For Your Load Approval

When applying for a joint mortgage with a co-borrower, lenders actually take the middle of three credit scores from Equifax, Transunion, and Experian for each borrower and then take the lower of those two. If you had a 760 middle score and your co-borrower had a 640 middle score then the lender would qualify you both at the 640 score which will increase your mortgage rate quite a bit or disqualify you. There are excepts for this sometimes for large loans over $400K when the higher score is also the highest earner of the co-borrowers.

Mortgage Myth #2 - The Rate That You Are Originally Quoted is the Rate You Will End Up With

Mortgage rates will change unless you lock into a rate the minute it's quoted because the rates are based on daily trading of mortgage bonds. Sometimes if you refinance your home you can lock into a rate when it's quoted if you've given the lender the information and documentation required but this isn't the case with homebuyers. Mortgage rates are tied to both the borrower and the property, so you can't lock a rate at preapproval in most cases since the property hasn't been found yet. Note: Your APR rate is just a disclosure to help you understand lending fees, it's not your locked rate. 

Mortgage Myth #3 - A Fixed Rate Mortgage Is Always Better Than an Adjustable Rate Mortgage

The rate on a 30 year fixed loan can never change so that can be good in bad financial times but know that the longer you keep a fixed rate the higher the rate will be. So some homeowners know that will only have the home for a short period of time like 5 years and in this scenario a lender could get a 5 year adjustable rate mortgage (ARM) instead the 30 year fixed and save about .875% on their loan, or about $146 a month on their monthly mortgage payment. So you should know your situation and the risks and make a good sound decision on how your loan is structured. 

 

Mortgage Myth #4 - Real Estate Agents Don’t Care Which Lender You Use

By law, mortgage shoppers can use whoever they wish to use for their mortgages by real estate sides on boths sides do care which lender you use because they both know that selling agents prioritize approvals from local lenders who are known and respected in the area.  

 

Mortgage Myth #5 - Mortgage insurance is Always Required When You Put Less Than 20% Down For the Loan

Mortgage insurance is an expense most lenders will make you pay when you put less than 20% down but there are exceptions. A "piggyback" mortgage takes place when your 1st mortgage is for only 80% of the home's value and a 2nd mortgage is taken is for up to 20% of the value of the home. 

 

It doesn't cost anything to sit down with us to learn more about the mortgage process and your options. 
 

Contact us (859-802-7000) for more information!

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Frank Littrell

859-802-7000

 

Serving Northern Kentucky & Greater Cincinnati Areas

 

Specializing In Residential Resale, Buyer & Seller Representation, Investments, REO Properties

• Licensed REALTOR in KY since 1987
• Licensed REALTOR in OH since 2004
• New Construction Sales Specialist
• Active in all Greater Cincinnati Markets
• Extensive REO Experience (10 years)
• Working with Ocwen/Fannie Mae, etc.

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