Myth 1 - Sellers must disclose all the property's problems.
The Truth - Sellers must disclose only the problems they know about. And some states don't require Sellers to disclose problems that should be obvious to any potential buyer. Examples of obvious problems are a window with a broken pane of glass or a garage with its door missing.
Don't rely on your realtor's advice as to the property's condition - the realtor is a sales agent. They get a commission only if and when the property sells, so the realtor's opinion can be biased against you. It's best to hire a certified and licensed home inspector to inspect the property and give you a written report as to what's wrong with it.
Remember: It is the Buyer's responsibility to thoroughly check out the condition of a property before buying it.
Myth 2 - You should always try to get a 30 year fixed-rate mortgage rather than an adjustable-rate mortgage (ARM).
The Truth - It really depends on how long you expect to keep the property.
An ARM has a rate that is locked for a specified time period (usually 1, 3, 5, or 7 years) that is much shorter than 30 years. This shorter loan period reduces the lender's risk which allows the lender to offer an ARM at a lower interest rate than that of a 30 year fixed-rate mortgage. Often, the difference in interest rates between a 30 year fixed-rate mortgage and an ARM is 2-3 %. Also, a shorter ARM loan period means a lower interest rate, so that a 3 year ARM will have a lower interest than does a 7 year ARM.
Obviously, paying less interest means a lower monthly payment and more money in your pocket every month. On a $100,000 loan for 30 years, a 4% interest rate requires a monthly mortgage payment of $477.42 (principal and interest only) while a 6% interest rate translates into a monthly payment of $599.55. That $122.13 is a 25% increase in the money paid month.
Remember: If there's a good chance you'll sell a property before the ARM's rate adjusts, an ARM is better than a 30 year fixed-rate mortgage.
Myth 3 - You need a really good credit score to qualify for a mortgage.
The Truth - Don't assume that your current credit score will keep you from getting a mortgage because it probably won't. Make that assumption and you may be working for a year or two to improve your credit score when you could have spent that time in your new home.
The fact is that almost anyone who can afford the monthly payment can qualify for a mortgage loan. The strength of your credit score determines how high your interest rate will be, rather than whether you qualify for the loan. If your credit score is low, you will have to accept a higher interest rate than you would have gotten with a better credit rating.
Also, if a lender does reject your mortgage loan application, ask them to tell you specifically why they turned you down and ask them for a copy of your credit report. Then take the credit report to a credit counselor and pay them to tell you what you need to do to improve your credit rating. It may cost you a couple hundred dollars for this information, but improving your credit rating by targeting specific areas of your credit report is easier than trying to improve your credit rating when you don't really know which areas need work.
Remember: Apply for a mortgage loan even though you have a lower than average credit rating if you are willing to pay a higher than average interest rate.
The Truth - Sellers must disclose only the problems they know about. And some states don't require Sellers to disclose problems that should be obvious to any potential buyer. Examples of obvious problems are a window with a broken pane of glass or a garage with its door missing.
Don't rely on your realtor's advice as to the property's condition - the realtor is a sales agent. They get a commission only if and when the property sells, so the realtor's opinion can be biased against you. It's best to hire a certified and licensed home inspector to inspect the property and give you a written report as to what's wrong with it.
Remember: It is the Buyer's responsibility to thoroughly check out the condition of a property before buying it.
Myth 2 - You should always try to get a 30 year fixed-rate mortgage rather than an adjustable-rate mortgage (ARM).
The Truth - It really depends on how long you expect to keep the property.
An ARM has a rate that is locked for a specified time period (usually 1, 3, 5, or 7 years) that is much shorter than 30 years. This shorter loan period reduces the lender's risk which allows the lender to offer an ARM at a lower interest rate than that of a 30 year fixed-rate mortgage. Often, the difference in interest rates between a 30 year fixed-rate mortgage and an ARM is 2-3 %. Also, a shorter ARM loan period means a lower interest rate, so that a 3 year ARM will have a lower interest than does a 7 year ARM.
Obviously, paying less interest means a lower monthly payment and more money in your pocket every month. On a $100,000 loan for 30 years, a 4% interest rate requires a monthly mortgage payment of $477.42 (principal and interest only) while a 6% interest rate translates into a monthly payment of $599.55. That $122.13 is a 25% increase in the money paid month.
Remember: If there's a good chance you'll sell a property before the ARM's rate adjusts, an ARM is better than a 30 year fixed-rate mortgage.
Myth 3 - You need a really good credit score to qualify for a mortgage.
The Truth - Don't assume that your current credit score will keep you from getting a mortgage because it probably won't. Make that assumption and you may be working for a year or two to improve your credit score when you could have spent that time in your new home.
The fact is that almost anyone who can afford the monthly payment can qualify for a mortgage loan. The strength of your credit score determines how high your interest rate will be, rather than whether you qualify for the loan. If your credit score is low, you will have to accept a higher interest rate than you would have gotten with a better credit rating.
Also, if a lender does reject your mortgage loan application, ask them to tell you specifically why they turned you down and ask them for a copy of your credit report. Then take the credit report to a credit counselor and pay them to tell you what you need to do to improve your credit rating. It may cost you a couple hundred dollars for this information, but improving your credit rating by targeting specific areas of your credit report is easier than trying to improve your credit rating when you don't really know which areas need work.
Remember: Apply for a mortgage loan even though you have a lower than average credit rating if you are willing to pay a higher than average interest rate.
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