3 Popular Mortgage Myths Busted! 
Obtaining a mortgage can be a tricky thing. Whether buying a home or refinancing the remaining balance, the chances are that we are dealing with your largest financial asset and that can be scary. Don't let that fear blind you into falling for a couple of common misconceptions.
#1 - Letting Multiple Lenders Look at your Credit will Ruin your Credit Scores.
A quick look at the website http://www.myfico.com/CreditEducation/CreditChecks.aspx will confirm that mortgage inquiries aren't calculated the same way that credit checks for something like a store or gas card are checked. A mortgage is a large purchase and chances are that you aren't buying or refinancing several properties at once and if you are, you are probably already savvy enough to have a mortgage professional and are comfortable with them having your up to date credit score. Because a mortgage is a large purchase the new FICO rules allow for a 45 day window to shop for a home loan. This means that you could potentially have your credit reviewed by 45 different lenders, a different one every day for a month and a half and they would all receive the same scores and on the 46th day your profile would see the normal 2-3 point ding depending on your personal credit profile.
A couple of points regarding this: First- If your credit is excellent, great, what good is a good credit score if you aren't actually going to take advantage of it for your mortgage, Second- If you score isn't great, fine, let's find out about it now and either find you the mortgage you qualify for currently and if that works let's lock it in or at least put together a plan to get the credit score up to where we need it, and Third- Last but not least, this score change was created with the consumers best interest in mind, you can now talk to multiple lenders without fear of hurting your chances with the first lender, that's a good thing.
Take a look at myfico.com and verify the information there yourself, you'll see that the Multiple Credit Check Myth is clearly Busted!
#2 - I'm going to keep my home forever!
The 30 Year terms had low rates for so long that we didn't really have to fight this myth much in the last 5 years. It was easy to just go along with the myth and keep writing 30 year loans for people that won't keep their mortgage longer than 7-9 years. It's true, very few people keep their loans to term for a full 30 years. Most people sell, relocate and buy again or are forced to refinance due to some financial need like college bills, divorce or medical emergency. The very few that do intend to pay their home off don't get a 30 year loan, they finance on a 15 year term which always carries a significantly lower rate. If it's really important for you to own your home free and clear at some time, let's get you a 15 year loan that fits your budget. The rest of us should just fess up that having a home loan is just like renting a home except we are our own landlords and the payments are tax deductible. Once we realize that our goal isn't to own the home free and clear it makes it much easier to talk about one of the new safe ARM products that are backed by the government and locked in for up to 10 years. Paying to lock in a rate for 30 years and then only using 7-9 years of that rate lock could cost you over $10,000 on an average $200,000 loan amount. That's $10,000 most of us would rather have in the bank account. This information is easy to check, http://www.realtor.org/reports/highlights-from-the-2013-profile-of-home-buyers-and-sellers , the NAR survey shows that average tenure for a home owner rose to 9 years this past year, primarily because of the housing crunch and many people were upside down in the home and had to wait it out until the value rose. The average home ownership tenure since 1991 has only been 6 years! This Myth is Busted.
#3 - I make my payments on time so I should be entitled to a good loan.
This one comes in multiple forms and is always particularly crushing. Please don't be personally offended when your Mortgage Banker doesn't just take your word for your credit score, income or asset information. The recent Mortgage Regulations including the Frank Dodd Act and the new Qualified Mortgage Rules make it a requirement for your information to be verified. Please don't be coy about your income or situation either, if you are self employed and have a roommate that helps you make the payments please let your banker know. It might not help you qualify but at least your banker knows that extra attention will be needed in order to obtain a valid approval. No one should be made to feel like a second class citizen but if you happen to run a cash based job and don't claim all the income to Uncle Sam please don't expect to obtain that same Uncle Sam backed mortgage with a low rate. If you run a higher risk financial lifestyle you are bound to get a higher risk loan, payment history will only help so much. Just check out these new rules if you are really that interested in knowing "why" http://www.consumerfinance.gov/regulations/ability-to-repay-and-qualified-mortgage-standards-under-the-truth-in-lending-act-regulation-z/ . Myth Busted.
Generally speaking, if you are looking to obtain financing for a home loan, be prepared to bare all of your financial history and information including your credit report, full tax returns and all liquid assets. If you are open with this information most professional mortgage bankers will be able to offer you a competitive quote for your business. If you are open minded and fall into the category of a 15 year fixed or a 5-10 year tenure in the home you'll save even more! Happy Loan Hunting!
Comments(2)