One of the goals of every American is to own their personal dream house. While very few can actually live this dream without paying too much money, others may have to take out a loan to cover the costs. Such a loan is usually given by banks and is called a mortgage.
There is a great deal of hearsay, however, surrounding mortgage and repayment plans. Though most of these myths lack merit, they have, nevertheless, succeeded in creating misconceptions about mortgage interest. What are some of these myths?
The interest rate is important because debtors will service their debts for thirty years. This is untrue.. Nobody keeps their mortgage for that long (well, not a person who acts with intention). It is possible to hold your mortgage for a period of five-to-seven years. As time goes on, there will be opportunities to refinance to pay off lower debts. Others pay off their mortgages outright.
The rates charged for mortgages are under the control of the Fed. The Fed plays little-to-no role in determining the rate of mortgage interest you pay. Factors like supply and demand for the money, monetary policies, and inflation can affect the rates of a mortgage, though.
The same mortgage rate for all. If you believe that everyone is charged the same mortgage rate, you would be far from the truth. Individuals taking on a mortgage loan have their rates calculated after factors—like a credit score—are taken into consideration.
You can get lower rates if you look out for them. You may find a good rate for your mortgage, but there are no guarantees that the rate will be the lowest available to you. This is because market rates fluctuate from time to time.
The only thing to consider is the interest rate. Interest rates are important in deciding the mortgage to choose, however, so many other factors need to be taken into consideration before taking out a mortgage. For example, you may have to look at the track record of the lenders.
Low rates are beneficial to the economy. Depending on how you look at it, low mortgage rates are not beneficial to some people. Those who are most likely to benefit from low-interest rates are those applying for a mortgage. When the interest rates become excessively low, those saving money in financial institutions, as well as pensioners, are most likely going to have their interest wiped away. As you save up for your mortgage down payment, consider setting aside your money in a high-yield savings account like Qinta which can earn you up to 10% APY. Sign up here to get early access once it launches publicly.
Your credit score has to be flawless. Even though your credit score can be considered a factor in giving you a loan, it doesn't have to be a perfect score. Even if you have a lower credit score and are dealing with other additional factors, you may still be able to access mortgage loans.
Your credit score doesn’t have to be flawless to find a mortgage that fits your budget. While credit history is certainly one of the factors determining whether a borrower is approved for a loan, it also impacts the interest rate offered to a borrower, though an 800+ score isn’t necessary.
Misconceptions about mortgage interest in America have prevented a lot of people from fulfilling their goals of owning housing properties. As you save to prepare for a house purchase, consider setting aside your money in a high-yield savings account like Qinta which can earn you up to 10% APY. Sign up here to get early access once it launches publicly.