5 mortgage misconceptions
(1.) Mortgage rates are only released once per day:
Mortgage rates are priced live with the market for all types of mortgages and can change frequently, sometimes dramatically, throughout the day. Because of the rapid changes in mortgage rates and a lender’s ability to control what is offered, it is important to lock the rate to hedge against the risk of rising rates.
(2.) Borrowers will almost always get the best mortgage interest rates at the bank where you have a checking account:
Interest rates are largely market driven and it’s unlikely your bank will offer the most competitive interest rate available simply because you bank there. The regulatory environment is such that lenders and banks use non-discriminatory factors such as FICO credit score, LTV, property type, occupancy, loan purpose to name a few in determining overall interest rate.
(3.) You must put at least 5% down in order to get a home loan:
It is a common misconception that you need to put down at least 10 percent or even 20 percent on a home, especially in light of the recent housing crash. But FHA (Federal Housing Administration) loans allow borrowers to put down as little as 3.5 percent. FHA loans have gained popularity and may be a good loan option for those who may not have a large down payment or have a challenged credit history. FHA loans are available to everyone, not just first-time home buyers. There are also alternative loan programs through other agencies, including the Department of Veterans Affairs (VA) and the United States Department of Agriculture (USDA). These loans also require little-to-no money down. Source: Click Here
(4.) When doing a loan with two borrowers, lenders will look at each of your credit reports equally when determining qualifications and interest rate:
When applying jointly for a mortgage, lenders will pull a borrower’s credit scores from each of the three major credit reporting agencies: Experian, Equifax and TransUnion. The lower of the two middle scores from each report will be used to help determine your mortgage qualifications and interest rate. This means that the least creditworthy borrower will have the greatest effect on interest rate and monthly payment regardless of who the primary or secondary borrowers are.
(5.) If a borrower goes through a short sale or foreclosure, they must wait 7 years before getting another home loan:
Not necessarily. In most cases, you’ll typically only need to wait 2-4 years to buy a home after short sale depending on your down payment and the loan type you select. The FHA back to work program only requires a 12 month waiting period if you can prove loss of household income of 20% and loss of employment for a period of 6 months. The waiting period after a foreclosure is longer. Typically you’ll need to wait 3-7 years before getting another home loan. Even if you can afford to get a mortgage right now, you’ll need to rebuild credit to have a good credit score, which can take a few years to rebuild. Unique circumstances can lead to different outcomes, so make sure to check with your lender. Source: Click Here
5 Mortgage Don’ts
(1.) Make any large unexplained deposits into bank accounts. Large deposits will need to be explained within 90 days of applying for a mortgage loan and will be questioned by underwriting unless the deposit is a documented gift.
(2.) Make changes to your employment or income. Job stability is a major factor in the underwriting of a mortgage loan. Changing or quitting jobs, or deciding to become self-employed can greatly endanger the loan approval. Talk with your loan officer before you make any changes in your employment or income structure.
(3.) Apply for new credit of any kind leading up to applying for your mortgage or during the process before closing. For example, don’t establish credit lines for furniture, computers, appliances, etc. .
(4.) Overcharge or max out existing credit cards. This can cause havoc on your credit score and you need to show a track record of responsibility and show that you can manage your money.
(5.) Move money around or make any adjustments or transfers in your asset picture. Refrain from changing investments, moving positions, opening or closing accounts or substantially changing your asset picture without contacting first contacting your loan officer.
Thank you to Carese Busby of Colbalt Mortgage for these helpful tips!