Explaining Common Mortgage Misconceptions

Securing a mortgage that’s right for you and your family is a complex and detailed process, part of the reason you come to Altius Mortgage. Our brokers will work with you to find the best rates and loan setup for your home loan, and guide you through the tougher parts of the process.

A big part of our service to you involves steering you clear of common misconceptions within the mortgage industry. Many of these are myths that have somehow gained steam over the years, myths which could be very damaging to your finances. Here are some of the most common ones, plus the truth behind them.

Interest Rates

The housing crisis of the mid-2000s spawned one particularly noisy myth: That fixed-rate loans are always preferable to adjustable-rate loans. Because adjustable-rate loans and their variability were part of what spawned the collapse of the market, they’re often treated like the plague. But there are many cases where adjustable-rate loans might be best, just as there are cases where fixed-rate loans make more sense.

Additionally, it’s common for people to assume that the rate you’re quoted on the surface is the same as your final, actual rate. Mortgage rates are calculated on a daily basis – if you get your rate during pre-approval, there’s nearly a guarantee this rate will have changed by the day you’re actually signing the paperwork. To stay up to date here, make sure to keep on top of the lender with accurate rates.

Lender Choices

Mortgage laws prevent lenders and real estate agents from colluding for client recommendations, but there’s nothing illegal about agents having preferences. Know that your broker is a vital outlet, and the more reputable and respected in the industry they are, the better it might be for you. Altius Mortgage has reached the heights we have in part because of our reputation for legitimacy and reputable dealings.

Credit Scores

Credit scores are generally displayed using three numbers, representing three major American credit bureaus: Experian, TransUnion and Equifax. The common misconception here is that whatever your highest number of the three is, that’s the mark lenders will look at – this is false. They’ll typically average the score, and some might even look at your lowest score. Additionally, if you’re applying with a co-borrower, lenders will almost always default to the lower credit score between the two of you to lock in your final number.

Want to learn more about these common misconceptions, or any other part of our mortgage services? Speak to one of our brokers today.

3 Myths About Your Mortgage Loan

A mortgage is the largest single loan that most people will ever obtain in their lifetime, and with so much financial pressure it’s essential that you understand the process of obtaining a loan, repayment, and other critical factors that can impact your mortgage over time. Unfortunately there are some myths out there about mortgages that might cause some confusion, or cause you to miss out on the benefits that a mortgage can offer. We’re going to set the record straight on three common myths we hear.

Myth #1: You must have 20% to put down before you can buy a home

While it’s nice to put money down on a home, and we would encourage you to do so if you have that money available, it’s not actually a requirement. The benefit of putting money down is that it can provide immediate equity and lower your monthly payments and your overall mortgage loan, but if you are unable to come up with 20 percent there are other loan products for which you can qualify besides a conventional fixed-rate mortgage.

Even in cases where you do have 20 percent to put down, if that would wipe out your entire savings it may be more financially prudent to only put some of it down—for example, 10 percent—and save the rest in your “rainy day” fund.

Myth #2: There’s nothing I can do about the interest rate on my loan

Interest rates are perhaps the most critical factor in a mortgage loan, because lower interest means you will have a lower monthly payment and over the life of a 30-year loan you will pay less in interest. The best way to get a good rate is by having good credit, so if you are planning to purchase a home in the future, start checking your credit report now. The easiest actions you can take to improve credit are making all your payments on time for things like credit cards, student loans, and car payments, and paying down the existing debt you have.

If you are still unable to qualify for the lowest rate there are options to pay for “points”, which involves paying up front to lower your interest rate over the duration of your loan. Since there is cost at your mortgage closing, it will generally be more beneficial for homeowners who plan to remain in their house for a long period of time. If you’re thinking you might move in a few years, paying an up-front fee to lower the amount you’ll owe over the life of the loan might not be as good a deal. Talk to your mortgage professional to find out if it seems like a good option for your loan.

Myth #3: Fixed rates are always best

There are two main types of loans: fixed rates and adjustable rates. Fixed rates have a set rate that is locked in for the duration of the loan, while adjustable rates can change based on the market. The former is good if you can qualify for a low rate; the latter might be more beneficial if you think that rates will go down over the next few years. There are also hybrid options that can fix your interest at a low rate for a period of time, usually between 3 to 10 years, after which point it will adjust to market rates. This situation can work great for homeowners who only plan to stay in a house for a short period of time, because you can take advantage of lower locked-in rates now and sell the house before the rates start to adjust.

Talk to a mortgage professional to clear up any confusion and questions you might have about buying a home. It’s important to be clear about all your options and avoid the myths so you get the best possible loan.