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Important Mortgage Facts to Know Before You Apply
The mortgage crisis that dominated headlines in the late 2000’s happened in part because so many homeowners did not understand the terms of their own mortgage loans. And as it turns out, many buyers still aren’t clear on many aspects of financing the purchase of a home, according to a survey conducted by Zillow. The survey of current and prospective homebuyers found that almost one-third (32.5%) of the time, the respondents could not answer basic questions about mortgages.
In an attempt to educate buyers before they commit to mortgage loans they don’t understand, here are some commonly misunderstood facts.
Fact 1: Mortgage rates change constantly.
It’s important to keep a close eye on rates when shopping for a mortgage, since these rates can and will change daily or even hourly – similar to the stock market. If you want a guaranteed mortgage interest rate, you must lock in and receive written confirmation from the lender.
Fact 2: Rates and fees vary from lender to lender.
Lenders do not have to offer the same rates on mortgages, although there are federal regulations that aim to standardize the loan process and prevent abuse. Each lender determines how much is charged for an appraisal, title insurance, credit checks and so on. In addition to knowing the interest rate, compare these fees to make sure you’re not overpaying.
Fact 3: “Annual percentage rate,” or APR, measures the cost of a loan.
The true cost of a mortgage loan can be confusing, so APR is intended to give a bigger picture of the total loan cost when including interest, closing costs and points. Since sometimes lenders that offer lower rates have higher fees, knowing the APR helps you to fairly compare rates between different lenders.
Fact 4: You may be able to refinance even if you’re underwater on your mortgage.
If you owe more than your home is worth, there’s still hope. There are now programs to help nearly all types of borrowers. And if one lender tells you “no,” this does not mean refinancing a mortgage is off the table. As with any mortgage, be sure to shop around and try other lenders.
Fact 5: Loans with low down-payment requirements still exist.
There are multiple programs that don’t require a high down-payment, and in some cases they involve no money down at all. Talk to your lender about FHA mortgages, programs through Fannie Mae and Freddie Mac, VA loans and USDA loans.
Talk to a City Bank Loan OfficerGet all your mortgage questions answered at your independent community bank – City Bank. Learn more by calling (800) OUR-BANK or set up a free consultation today.