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 mistakes?

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 mistakes.
  
  
• 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 objectively.
  
  
• 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, etc.).
  
  
• The best mortgage has the lowest interest rate. Not necessarily. The lowest interest rate comes at a price, usually in the form of discount points. 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., interest-only loans, graduated payment loans, 40-year fixed-rate loans) have high costs over the life of the mortgage.
  
  
• 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 situations, adjustable-rate mortgages 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!