Top 3 Mortgage Myths
Before you start the rigorous task of looking around and comparing mortgages in the market, it’s a sensible idea to distinguish between myths and reality. It will make your search a lot more productive – not to mention it will also considerably take lesser time. Here are some of the biggest myths you need to be aware of:
Myth 1:
The best way to shop for a mortgage is to compare points and interest rates.
Truth: Have you thought of the Annual Percentage Rate (APR)? If the APR of the mortgage loan you’re looking into is a lot higher than its interest rate, then you should be well on your guard that there might be hidden charges in the loan.
And what about closing costs? You should take into consideration that points and interest rates are only part of the details you ought to find out about – they are most certainly not all that you need to know.
Myth 2:
Zero-point loans are always the best loans.
Truth: Rather than thinking of what is socially ideal, think of what is most suitable for you. Every borrower has his own financial situation he has to think about. For some it may be better to have a lower interest rate with points; while others may find that a zero point loan as the best option.
It really depends on what is your situation and what you need. If you want to seek advice, talk the matter over with your mortgage broker.
Myth 3:
“My broker is giving me a sweet deal, a no points, no cost loan!”
Truth: First of all, a “no cost loan” simply doesn’t exist. Your broker may not necessarily be charging you with an origination fee, and he may also be shouldering your closing costs – but bear in mind that at the end of the day he will still get paid. Because he certainly wouldn’t dig into his company coffers to take care of your loan for you.
On some loans in the market, depending on the type, the broker may give a higher rate for the simple reason that the yield paid by the lender also tends to be higher – providing his profit and covering the closing cost as well.
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