Fact vs Myth
Myth: Refinancing isn’t worth it unless I lower my interest rate by 1% or more.
Fact: If we can do a zero closing cost mortgage, it is worth it to lower your rate by any amount. Other factors such as loan amount make a big difference. An individual lowering their rate by 1% on $500,000 saves far more than someone who only owes $50,000. Don’t let this myth keep you from analyzing your particular circumstances.
Myth: I should not payoff mortgage debt in order to write off the interest on my taxes.
Fact: Even though mortgage interest is usually tax deductible, the amount you pay in interest will far exceed any tax deductions you receive. (see your CPA)
Myth: Websites where banks compete have the best deals.
Fact: Banks must pay the website for your information and that cost is passed on to you the consumer.
Myth: My home value has dropped too much to qualify because of the poor housing market.
Fact: We have probably closed a mortgage recently for someone nearby that we can use to help gauge your current home value. We should try the free review.
Myth: It is better to not have an escrow account and pay taxes and insurance on my own. (or vice versa)
Fact: You’ll pay the same amount for taxes and insurance regardless of escrowing. It’s true that you can earn a little interest by keeping the money throughout the year but you might qualify for a pricing incentive if you choose to escrow. In some situations, the savings can be minimal which makes escrowing more of a personal preference. Some mortgage products require an escrow account.
Myth: I should never pay points.
Fact: If paying points results in a lower interest rate, it is an option that you should carefully consider.
Myth: I should avoid paying mortgage insurance or PMI at all cost.
Fact: Anyone that owes more than 80% of their home value must account for the added risk in some form. It could be in the form of a higher interest rate, mortgage insurance, or possibly a second mortgage. Mortgage insurance in itself isn’t a bad thing if it enables you to secure a good loan at a low interest rate. It is one of many factors to consider.
Myth: I should never pay off personal loans with a mortgage because I’m stretching it out 30 years.
Fact: All things being equal, it is best to have the lowest interest rate and lowest total cost to repay your debt. Often a secured mortgage is less expensive than unsecured debt such as a credit card.
Myth: I should only do a mortgage at a bank that keeps their loans and does not sell them.
Fact: The amount of fees and interest you pay is far more important than the name you write on the check each month. It is rare to find a bank or lender that will guarantee not to sell your loan without restricting your options and increasing the cost of the loan.
Myth: Refinancing means starting at 30 years all over again.
Fact: Most mortgages can be set up in 10,15,20,25, and 30 year terms. Furthermore, mortgages without prepayment penalties allow you to pay off the loan as quickly as you would like. When refinancing, consider the total amount it will take to completely repay your loan as the most important factor.
Myth: Pulling my credit will hurt my credit score.
Fact: To get an accurate pre-approval, credit must be pulled. Credit inquiries have a minimal impact and scoring models recognize when multiple inquiries are from shopping for a mortgage and only count them as one inquiry. If you are serious about getting a mortgage, you should have your credit report analyzed. We can do this for free as part of our free mortgage review.
Myth: Self-Employed people can’t qualify for a mortgage.
Fact: Sadly, there are countless loan officers that do not know how to properly analyze tax returns. Ours do know how. If you are self-employed you should have us review your tax returns as part of our free mortgage review.
Myth: I should need little or no documentation to get my loan approved…I didn’t need it before.
Fact: Lending guidelines have tightened greatly since 2006 and most reduced or no document loans are a thing of the past. It is best to gather all of your documentation such as tax returns, bank statements, and paystubs when applying. In today’s market, the best documented loans get the best deals.