3 Mortgage Loan Myths Exploded
1. Myth - Sellers must reveal all the property's problems. The Truth - Sellers must reveal just the problems they know about. And some states do not require Sellers to disclose problems which should be apparent to possible purchasers. A good example might be a garage with the door missing. It is actually the Buyer's obligation to look at the property completely prior to purchasing it. Do not rely on your realtor's guidance regarding the property's condition - the realtor is a sales agent. They earn a commission only in the event that and when the property sells, so the realtor's opinion could be opinionated against you. It is best to hire a qualified and licensed house inspector to examine the property and provide you a written report as to what is wrong with it.
2. Myth - It's always better to obtain a 30-year fixed-rate mortgage instead of an adjustable-rate mortgage (ARM).The Truth - This really depends upon the length of time you intend on keeping the home. An ARM has a rate that's locked for a specific period of time (generally 1, 3, 5, or 7 years) which is significantly shorter than 30 years. This shorter loan period reduces the lender's risk, allowing them to offer an ARM with a lower rate of interest compared to that of a 30 year fixed rate mortgage loan.
Frequently, the difference in interest rates is 2-3 %.On a $100,000 loan for 30 years, a 4% interest rate equates to a month-to-month payment (principal and interest only) of $477.42; a loan of 6% has a monthly payment of $599.55. The difference of $122.13 is a 25% increase in the money paid every month. Bottom line is if there is a high probability you will sell the home before the ARM's rate adjusts, an ARM is better than a 30 year fixed-rate mortgage.
Frequently, the difference in interest rates is 2-3 percent. On a $100,000 mortgage for 30 years, a 4% rate of interest equates to a monthly payment (principal and interest only) of $477.42; a loan of 6% has a monthly payment of $599.55. The difference of $122.13 is a 25% increase in the money paid each month. Bottom line is that if there's a high probability you will sell the home before the ARM's rate adjusts, an ARM is preferable to a 30 year fixed-rate mortgage loan.
3. Myth - You need a really good credit rating in order to qualify for a mortgage. The Truth - Don't presume that your present credit rating will keep you from obtaining a mortgage loan because it probably won't. If you do make that assumption, you may be working for a year or two to improve your credit, when you might have spent that time in your new home. The truth is that most people who are able the month-to-month payment can qualify for a mortgage despite a low credit score, but they will have to accept a higher interest rate than they would have gotten with a better credit score.
Then take the credit report to a credit counselor and pay them to inform you what you need to do to improve your credit rating. It may cost you a few hundred dollars for this information, but enhancing your credit rating by targeting specific areas of your credit report is easier than attempting to improve your credit rating when you don't really know which areas need work.
C Baker is a professional textbook editor who builds many useful websites as a hobby. You\'ll find his latest site at http://www.energysavingbulbs.bst3.com. If you\'d like the latest news and views on efficient lighting, visit EnergySavingBulbs.com..