Fixing 4 mortgage misunderstandings for you

News at Howes Estates | 18/09/2015

Dealing with mortgages can become rather tricky and difficult to get your head around if you don’t know the ins and outs, and this is why we’ve gathered 4 mortgage misunderstandings that are common among mortgage based issues for you.

Defining credit reports equally if applying with a spouse: When applying for a joint mortgage, lenders will pull your credit scores using the resources of each of the three major credit reporting agencies: Equifax, Experian, and TransUnion. The middle score is then taken from each set and they’ll use the lower of the two to aid in them determining your mortgage interest rate. This means that the borrower who is least creditworthy will have the largest consequence on your monthly payment. It matters not who the primary or secondary borrowers are.

Interest rates a reflection of the true cost of your mortgage: The annual percentage rate (APR) you have is in fact the figure that denotes the real cost of your mortgage. Your APR is inclusive of your interest rate, mortgage insurance (when applicable), points and other fees, such as underwriting fees and origination. It doesn’t contain the cost of your homeowner’s insurance policy. The APR is, as a rule, higher than your interest rate as it combines the rate and the fees as one. It’s worth noting that, when looking for a mortgage, it’s advisable to compare possible loans based on APR as opposed to the interest rate, as it gives you a clearer idea of the total cost over the span of the loan.

Best interest rates come from the bank you use: The long and the short of this is, no. However, we’ll divulge. There are some banks who will give their customers discounts, although it is unlikely your bank will be the lender to offer you the best interest rate available purely because you bank there. If you want to obtain competitive mortgage rates and terms, you should take a look at quotes from multiple lenders, again, a service our independent advisors can assist with. And you never know, your bank could have the best offer.

Home loans are available with less than a 5% down payment: This is quite a common misconception that you need to put down a 10, 15, or even 20% on a house. It’s certainly possible to put down as little as 3.5% and still, quite often, be able to obtain a mortgage via the Federal Housing Administration (FHA).

FHA loans have become an established loan option for people who mightn’t have a large down payment behind them or have previous blotches in their credit history. The FHA loans are available to everyone, they aren’t reserved purely for first-time home buyers.

If you would like any more help in regards to property advice why not contact our estate agents? Devon-based Howes Estates have a wealth of experience and are happy to help you find the outcome you’re looking for.


Image: Anssi Koskinen under Creative Commons.

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