Educating yourself about your loan options during the home buying process can save you money and frustration.
A recent Zillow survey showed some interesting statistics about what home buyers actually know (Or don’t know) about obtaining a home mortgage loan. Out of 1,000 current and prospective homeowners, it was discovered that:
- 34 percent don’t know what the term “APR” means
- 31 percent don’t believe it is possible to obtain a home mortgage loan with less than 5% as a down payment
- One in four believe that they must close escrow using the same lender who originally pre-approved them for their home loan
Let’s clarify these home mortgage myths, shall we?
What does APR stand for?
APR stands for Annual Percentage Rate. It is described as the rate of simple interest on a loan for a whole year. This is also known as nominal APR. It gets a little bit more detailed when we discuss effective APR, which is described as the fee PLUS compound interest for an entire year.
Is it true that home buyers can obtain a loan with less than 5 percent as a down payment?
Yes, it is true. There are several home loan options that include options for down payments of less than 20 percent, and even options that allow you to pay as little as 1 percent. No money down loans are still available, but you may need to pay PMI (Primary Mortgage Insurance). PMI protects your lender who has approved you for a loan that is above an 80% LTV (Loan to Value Ratio) in case you default on your mortgage payment.
Do I have to close escrow using the same home mortgage lender who originally pre-approved my loan?
The answer is no. There may be some unscrupulous lenders who insist you use them throughout the entire escrow process, even if you are unhappy with their service or finance rates/costs. You can “double app” (Apply with another mortgage lender) during the escrow process, but it is important to do it as early as possible to avoid contingency issues that may affect your ability to close the sale of the home.
Your best bet is to ALWAYS shop around and compare interest rates, closing costs, and other fees associated with home loan mortgages. We usually recommend you find a lender that works in the area where you are making your home purchase as, just like working with a realtor, they usually have relationships with area real estate agents, escrow and title firms, and can work a lot more closely with them to insure your home closes on time. That being said, the most important thing is to find a lender that you are comfortable working with, and that you can trust.
We are here to help with all of your real estate needs!
Team Avalos Real Estate has nearly 20 years experience in the real estate industry working in the Santa Clarita Valley, the San Fernando Valley, and surrounding Southern California communities. Let us guide you in your journey to the home of your dreams. Call us, or use the quick response form below to send us a message.
Team Avalos Real Estate
Keller Williams VIP Properties
25124 Springfield Court, Suite 100
Valencia, CA 91355
Office: (661) 290-3743
Carlos direct: (818) 399-4093
Rose direct: (818) 590-2077