Mortgage Myths and Mortgage Mistakes
Most home buyers pay too much for their mortgage - often, thousands of
dollars too much. Why do home buyers make such costly mortgage
Mortgage Myths Lead to Mortgage Mistakes
When we shop for a mortgage, we make many
decisions that affect the
cost of our loan. Ideally, we should base these decisions on fact and
analysis, but too often we rely on flawed assumptions.
These flawed assumptions are called mortgage myths.
Mortgage myths lead to mortgage mistakes, and ultimately cost us money.
Some of the most damaging mortgage myths are listed below.
- The mortgage business is too complex.
Believing it is too complicated, few home buyers try to
understand how different factors affect total mortgage cost.
Lacking knowledge, they make mistakes. This tutorial will help
you build a solid knowledge base and avoid costly
- Mortgage professionals will look out for me.
Although mortgage professionals can
be helpful, they have mixed loyalties. They are
paid to earn a profit for their employer; and the best loan for
you may not be the most profitable loan for their
employer. We show you how to assess their advice
- The APR is good way to evaluate loans.
As a tool for comparing loans, the
annual percentage rate (APR) is flawed, mainly because it
is computed over the full term of the mortgage. The
loan that is best over the full term may not be best over a shorter time
period. We will show you a better way.
- I cannot affect interest rates. False!!
Home buyers can affect the rate they pay in many ways
(through the lender they work with, the mortgage they choose, the
points they pay, the size of their down payment,
- The best mortgage has the lowest interest rate.
Not necessarily. The lowest interest rate comes at a price, usually in
the form of
This tutorial will show you how to evaluate your options, to identify
the best combination of points and interest rate.
- The best mortgage has the lowest monthly payment.
It is a mistake to focus exclusively on the monthly payment.
Some mortgages with low monthly payments (e.g.,
graduated payment loans, 40-year
fixed-rate loans) have high costs over the life of the
- The best mortgage has the lowest upfront cost.
This is seldom true. Mortgages with low upfront costs
(no discount points, low down payment, low closing costs)
typically have higher interest expense and often cost more over the
life of the loan.
- Adjustable-rate mortgages are too risky. In some
carry little risk, and provide significant cost savings over
fixed-rate mortgages. We show you how to determine when
adjustable-rate mortgages are the best choice.
How to Avoid Mortgage Mistakes
Think about the mortgage myths cited above. They lead us to make
wrong, costly decisions; yet, they persist. Why?
- Home buyers lack information about mortgage options.
- Home buyers do not know how to evaluate mortgage options.
Most people are not aware that they've made a mortgage mistake, because
they do not realize that better options were available. This tutorial
will show you how to identify the best options.
With just a small investment of time, you can
turn yourself into an informed mortgage buyer, avoid mortgage mistakes,
and save a lot of money on your mortgage. Read on!