The process of getting a mortgage can be a complex and confusing one, and all the myths around mortgages certainly don’t make the process any easier.

So, the question is, what are some of the most common mortgage myths?

recent article from realtor.com busted some of the most persistent myths around mortgages and the homebuying process, including:

  • The lowest rate is always the best choice. Many buyers think that the mortgage with the lowest rate is automatically the best option. But that’s not always true; for example, if a loan has high origination fees or early payoff penalties, it might not be as solid of an option as a mortgage with a slightly higher interest rate—but lower or fewer fees.
  • Pre-qualification and pre-approval are the same thing. Some buyers think pre-qualification and pre-approval are essentially interchangeable steps in the mortgage approval process—but that’s simply not true. Pre-qualification is essentially having a conversation about mortgage qualifications with a lender. It can be helpful, but it’s not enough to start looking at or making offers on properties. A pre-approval, on the other hand, entails sharing all your financial information (like pay stubs, tax returns, and bank statements) with a lender—and it’s a must before you start looking at homes.
  • Adjustable rate mortgages (ARM) are always a risk. The 2008 financial crisis made many buyers wary of adjustable rate mortgages (ARMs)—often to the point that they won’t even consider one. But ARMs can be a good fit for certain buyers; for example, if you’re planning on moving within 5 years, and an ARM’s rate doesn’t increase before that five-year mark, an adjustable rate mortgage could help you save a significant amount on interest (since initial rates on ARMs are typically extremely competitive).

The Takeaway:

What does this mean for you? If you’re thinking about buying a home, it’s important to get yourself pre-approved prior to starting your search. Once you find a house and get an offer accepted, be open to the various mortgages available to you. And, don’t just jump at the lowest rate a lender quotes you, since it may not be the best overall loan for you and your future plans.

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