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November 15, 2017


Going into the mortgage process, it is common for many first-time or even seasoned homebuyers to have a few misconceptions. With reasonable and clear expectations, the entire process of obtaining home financing can be simple and painless. Here are few myths about the homebuying process, combined with the truths behind them.

Lenders only look at your best credit scores

When you apply for a loan, all three reports from the major credit agencies — Experian, Transunion and Equifax — are pulled. Your lender will look at all of them then use the middle of the three. If you are applying as a couple, each borrower’s middle score will be looked at and the lowest middle will be used for approval. This means that if you have a score of 780 and your spouse has a score of 700, your loan is likely to qualify at 700.

One exception is jumbo loans: typically in a situation where one borrower has a higher score and is a higher earner, some lenders will allow the higher credit score on the file to be used.

The rate you are quoted at the start will be the rate you get

Rate quotes, unless locked in immediately, are akin to an estimate based on the market and your personal eligibility. The rate quotes can change over the course of the process.

For those seeking a mortgage refinance, locking in a rate when its quoted to you is possible as long as you’ve provided your lender with sufficient information. For homebuyers, through, this is more tricky: you are typically given a rate quote at the start of your pre-approval process, but you cannot lock in that rate until you’ve actually found a property you aim to buy.

Fixed rate loans are better than adjustable rate loans

The loan you choose is going to be the one that works best for you and your unique finances. While rates are historically low, it may be tempting to play it safe and opt for a 30-year fixed rate mortgage. But if you are not sure how long you’ll own the home, a adjustable rate mortgage (ARM) may be a better option. ARMs have lower rates and shorter durations before the rate resets, so if after 5 years you are looking to move on and sell the house, you’ll have saved serious money in that time.

Mortgage insurance is always required for down payments less than 20 percent

While lenders typically require you purchase mortgage insurance on all loans where the borrower is putting down less than 20 percent of the principle as a down payment, certain loan programs like a “piggyback” loan or VA loans allow for no mortgage insurance premiums for those who qualify.

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