The field of mortgages and lending is a complicated one. In many cases, these loans deal with amounts of money that many cannot fully grasp or imagine. The result is that there are myths that have proliferated over time. As Fayetteville’s leading provider of mortgage loans, The Mortgage House, LLC. is committed to empowering our clients with the knowledge they need to make smart borrowing decisions. That’s why we’ll use today’s blog to debunk some of the more prevalent mortgage myths that are out there.
Pre-Qualified And Pre-Approved
When homebuyers are first starting to look at homes and mortgage loan options, they often hear the two terms, pre-qualified and pre-approved, thrown about as they shop. The result is that many believe that these two phrases mean the same thing. In reality, they’re as different as apples and oranges.
Pre-qualifying is a far less formal process than pre-approval. Pre-qualifying simply means that you took the time to fill out the information that a lender provided and they gave you a quick estimate. Pre-approval, however, means that the lender has examined your credit, and looked at your income and assets. The lender then makes an offer to provide you with a loan up to a pre-approved amount. Pre-approval gives you as a buyer much more negotiating power when you’re making an offer on a house, and buyers will take you much more seriously.
Interest And APR Are One And The Same
There’s no denying that interest plays an important role when looking at mortgage loan options. Buyers will always want the lowest rate possible. But it’s also important to look at the annual percentage rate or the APR. The APR offers you insights into what fees are included in the mortgage loan. The APR is the total cost of working with the lender, including the interest rate, and discounts, fees paid to brokers, and the costs of closing. Your interest rate will tell you how much you’ll pay toward your loan every month, but the APR is used to compare the total fees you’ll be paying for between different lenders.
A Home Is A Great Investment
It’s a long-standing myth that owning a home is a great investment. While this may have been true 50 years ago, the housing crisis and the Great Recession changed much of that. The fact is that while property values have grown faster than inflation rates, they aren’t beating them by much, only by 0.08%. Many feel that owning a home is a smarter choice than renting. In some cases, this is true. But by renting, you’re avoiding paying property taxes, there are lower insurance costs, and you’ll avoid paying for much of the maintenance and upkeep for the property. In some cases, renting may be a sounder financial option. That said, in other cases, buying a home is a great option. It builds equity, improving the value of the home. But don’t expect to be able to retire early if you sell your house soon after buying it.
There’s Only One Kind Of Mortgage
While many brokers would have an easier job if all mortgages were the same, that just isn’t the case. Mortgages are different across lenders and across regions. That’s because the amount that can be loaned is determined by the financial history of the individual applying for the loan. Additionally, closing costs, brokerage fees, and other related fees can impact just how much the loan will cost you in the long run.
It’s Best To Pay Off Your Loan ASAP
While this might be true for some loans, it might not be true for your mortgage loan. Currently, the market has very loan interest rates, so paying off your loan faster might keep your money from growing in value elsewhere. For instance, if you put more money toward your loan that has a 4% interest rate, but a portfolio has a 6% interest rate, you’re actually losing out on money by paying off your loan faster.
Connect With Your Top Rated Local® Mortgage Broker Today
Are you looking for a mortgage loan in the Fayetteville area? You can trust The Mortgage House, LLC. to find you the best loan with the best rates for your circumstances. With years of experience, and a commitment to the customer experience, we’re here to serve you as best we can. Stop by today, or apply online. Contact us to learn more!