Misconceptions about mortgages can cause buyers to stumble on the path to their next home purchase and even cost them money. So let’s bust some common mortgage myths!
Pre-qualification and pre-approval are the same thing. Mortgage pre-qualification is based solely on your unverified, self-reported financial information. Pre-approval, on the other hand, means the lender has checked your credit, verified your income, assets, and debts, and given you a specific mortgage amount. As such, pre-approval carries much more weight with sellers and real estate salespeople than pre-qualification.
Once you are pre-approved your mortgage is guaranteed. Borrowers beware! Your lender may check your credit again before the closing date of your new home. If there have been any significant changes in your financial status (you’ve made a major purchase or changed jobs, for example), your mortgage could fall through. Keep the status quo until the transaction has been completed.
You’ll get the best deal by sticking with your current financial institution or lender. You may get the best deal, or you may not. Don’t be afraid to talk to your lender or broker to make sure you always get the most competitive rates and terms. You wouldn’t get anything else so pricey without researching it thoroughly – why should your mortgage be any different?
The mortgage with the lowest interest rate is the best deal. Not necessarily. That mortgage could actually end up costing you more than one with a higher rate because the lender may pile a lot of fees on top in order to compensate for the money lost on interest. Be sure to consider fees and terms (like prepayment privileges) when comparing loans.