Mortgage in RivertonWhen it comes to financing your dream home, making wrong assumptions could actually hamper your ability to purchase the right property, warns an expert from The Mortgage Partner Inc. Sadly, there’s a chockfull of mortgage myths online that plenty of homebuyers actually believe. Below are 4 of the most common.

Mortgage Myth #1: The Best Option is Always the One that comes with the Lowest Mortgage Rate

Although the interest rate is crucial since it directly affects your monthly payment amount, you should know that there are more fees that could significantly differ from one offer to another. For example, the origination fee for covering paperwork and processing could differ between .5% and 1.5% depending on the lender. To ensure that you choose the best mortgage rate, a loan officer from Provo recommends that you consult with different lenders and request for a detailed list of all the costs related to the mortgage offer.

Mortgage Myth #2: You Have to Pay a 20% Down Payment

While this is an ideal number since you’ll owe less money because of the significant down payment, not all mortgage programs will require you to put down 20%. With the FHA loans, for example, you could opt to put down as little as 3.5% down payment, considering that you have a credit score of at least 580. Even borrowers with credit scores between 579 and 500 could qualify if they could make a 10% at the least.

Mortgage Myth #3: ARMs are Only for the Risk Takers

An adjustable rate mortgage or ARM could be a sensible option for some borrowers. For example, an ARM is great for borrowers who plan to relocate within five years since your rate won’t start to adjust until you’ve already moved. Within that timeframe, you will have saved more interest since interest rates on ARMs are usually lower than fixed rate mortgages.

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Mortgage Myth #4: Preapproval and Prequalification are One and the Same

Simply not true. Essentially, prequalification means that you’ve already talked with a lender. Preapproval, on the other hand, indicates that your lender already has your paperwork, packaged the loan, and submitted your application to the underwriter for evaluation. While your application will still have to pass formal underwriting so you could purchase the property, your lender will have given you a formal letter detailing your preapproval status for a specific amount.

Now that you know that these mortgage myths are really nothing more than myths, go ahead and shop around for the best mortgage offer available to you.