The real estate site Zillow recently did a survey of 1,000 homeowners and prospective homeowners that determined many are confused by the mortgage process. Here are the biggest areas of confusion and the real facts. Knowing them could save you a bundle when you buy a home or refinance.
31% of buyers don't think it's possible to get a home for less than 5% down.
There are several ways a homeowner can purchase a home with less than 5% down. FHA Loans, VA Loans, USDA Loans all allow homeowners to buy a home with 0- 3.5% down. These programs cover millions of individuals. Comprehensive information can be found at the article Buying A House with Less Than a 20% Downpayment.
34% of homebuyers don't know what the term APR means.
APR, which stands for annual percentage rate is the interest rate as well as all the other costs that go into a mortgage, including any points, closing costs, origination and underwriting fees, and any other costs. These costs are bundled into the APR metric. So, while the interest rate of one mortgage might be lower than the other, if the APR is higher, you'll most likely be paying more over the life of the mortgage, including larger upfront fees.
24% of buyers believe they can get the best mortgage rate from where they currently have their savings or checking accounts.
While your current bank is a place to start, other banks or lenders may significantly undercut these rates. Be sure to shop around. Check the mortgage rate tables on BestCashCow or other sites to get a feel for a good rate. Talk to other lenders.
26% of buyers believe that once they are pre-approved, they are obligated to get a mortgage with that lender.
This is not true. A pre-approval from a lender does not require you to use them for the actual mortgage. Usually, the homeowner wants to see that you can get a mortgage and the pre-approval serves that purpose. Once your offer has been accepted, shop around and find the best rate. Not doing so could cost you thousands.