Mortgage Misconceptions (What You Want To Know Wednesdays)

Misconception: Your best credit scores are used in your loan approval.

Lenders take the middle of three credit scores for each borrower. If you are applying for a mortgage with a co-borrower and their middle score is 680 and yours is 780, the lender will likely qualify you with the 680 score.

Misconception: The rate you’re quoted is the rate you’ll get.

Rates are based on a daily market. Rates change daily, and even several times a day. Homebuyers will be quoted a rate at the beginning of the pre-approval process, but your rate will not actually be locked until you have found the home you want to buy.

Misconception: Fixed rate mortgages are always better than adjustable rate mortgages.

For good reason, too: The rate and payment on a 30-year fixed loan can never change. But the longer the rate is fixed for, the higher the rate. So before settling on a 30-year fixed, ask yourself this question: How long am I going to own this home (or keep the loan)? Suppose the answer is five years. If you got a 5-year adjustable rate mortgage (ARM) instead of a 30-year fixed, your rate would be about 0.875 percent lower. On a $200,000 loan, you’d save $146 per month in interest by taking the 5-year ARM. On a $600,000 loan, the monthly interest cost savings is $438.

Misconception: Real estate agents don’t care which lender you use.

You are always free to use any lender you choose, but agents care about which lender you use. They’ll suggest local lenders who are experienced with your area.

*brought to us by Zillow


* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.