In a recent survey done for Zillow, a surprising number of incorrect answers to true-or-false questions was given by prospective buyers. Over 75% of the folks who were asked didn’t know how mortgage interest rates were determined for a borrower. Most of them thought that annual income was the most important factor. (In truth, a lender does consider income, but also factors in your credit score, and debt-to-income and loan-to-value ratios.)
A variety of myths seems to have influenced some of the common — and incorrect — answers such as these:
- interest rates are set and released once a day
- FHA loans are for first-time buyers only
- prequalification commits the lender
- lender fees are not negotiable
- adjustable rate mortgages always go up.
Buyers’ misunderstanding of actual mortgage practices might give some insight into why more of them are not taking advantage of the greatly reduced prices and incredibly low mortgage rates.
While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. You also need to coordinate all of the different parts of the transaction including mortgage, title, insurance and inspections. This is a test you don’t want to fail.
If you’re ready to explore your options, are just need help understanding something, let me know.