What Do You Know About Mortgages? Part 2

Mortgages are rarely fully understood by home buyers since most home purchases only happen every 5-7 years.  Many home buyers do not keep up to date on mortgages, as they are only interested in them around the time they want to buy.  To help educate, Zillow has created a list of the top 10 mortgage misunderstandings.  Here are the final 5 in the list.  Don’t forget to read the first 5 if you missed them last week.

mortgage misunderstandings

6.  “When taking out a mortgage with your spouse, lenders will look at each of your credit reports equally when determining the interest rate you qualify for.”

Credit reports are pulled from the three major credit reporting agencies: Experian, Equifax and TransUnion.  When applying for a mortgage with a spouse, credit reports are pulled for both parties.  The lender will look at the middle score of each set and lower score of all reports to determine the interest rate of the mortgage loan.  This means that the one with the lowest score will affect the interest rate the most.

7.  “You cannot get a home loan with less than a 5 percent down payment.”

Many home buyers believe that you need to have anywhere from 10-20% down to purchase a home.  However, the Federal Housing Administration (FHA) loan is available to everyone, especially those who cannot make a large down payment.  Other agencies offer similar loans as well, such as the Department of Veteran Affairs (VA) and the United States Department of Agriculture (USDA).   These do not require a large down payment.

8.  “If you go through a short sale or foreclosure, you must wait 7 years before getting another home loan.”

The waiting period for a foreclosure is usually between 3-7 years depending on the down payment and loan type.  The most important factor when getting a loan is your credit score, and it can be difficult to improve your score in a few years.  However, some situations are different so it is important to speak with multiple lenders.

9.  “If you are underwater on your home loan, you are unable to refinance.”

Currently, there are two special government programs that help underwater home loan borrowers, the Home Affordable Refinance Program (HARP) and FHA Streamline Refinance.  HARP is available to home owners who have a loan backed Fannie Mae or Freddie Mac, while FHA Streamline Refinance is available to home owners who have a Federal Housing Administration (FHA) loan.  Both programs help home owners lower their interest rates and payments.

10.  “You can only refinance your home loan once every 12 months.”

Most loans today are backed by Fannie Mae or Freddie Mac allowing home owners to refinance as often as they would like as long as it is just to refinance to lower interest rates, not to get cash out.  It is important to take into consideration the length of time expected to be in the home as well as how long it will take to cover the costs of refinancing.

Mortgage misunderstandings can hurt you.   It is important to have a full understanding of your mortgage and what is available to you, before making a final decision.   Which misunderstanding caught you by surprise?

If you are interested in obtaining a mortgage or refinance loan in Ohio, Pennsylvania or Indiana, call ReCasa Financial Group today at 614.221.6770.  Our mortgage and refinance specialists have a great understanding of the permanent financing world.