Blog Post

3 Things People Don’t Know about Mortgages

Michael Weitzman • Aug 07, 2013

For many people, shopping for a new home can be fun.
Shopping for a mortgage, though? Not so much. Most home buyers focus more on finding
the right neighborhood than on intangible and sometimes confusing things like
mortgage terms. I’m a Grand Rapids real estate agent and not a mortgage lender,
but all the same, I can say that, similar to buying a home, a mortgage is an
important decision that you will live with for a long time.

Mortgages tend to be lengthy and complicated, and most of us
only have to think about them on the rare occasion when we move to a new home.
So it’s not surprising that according to a survey by Zillow.com back in April,
33% of people don’t know basic information about mortgages. Be sure to check out Zillow for
great information about current mortgage rates and home loans.

Below are three of the main things in Zillow’s survey that many people don’t know about mortgages,
as well as some quick clarifications.

Is it possible to get
a mortgage for less than 5% down?
It is. For example, you may qualify for a
loan for as little as 3.5% down through the FHA (Federal Housing
Administration). However, 31% of buyers in Zillow’s survey weren’t aware of
that.

What does “annual
percentage rate” (APR) mean?
The APR is the yearly rate that reflects the
true cost of a mortgage, including the interest rate, points, mortgage
insurance (when applicable), and other fees like loan origination and
underwriting fees. However, 34% of people don’t know that. APR is normally
higher than the interest rate quoted by lenders, and you can use it as a factor
when you compare loan quotes from different lenders. If you are able to find a
lower APR, even .5% lower, you may save thousands of dollars over the life of
the loan.

Do you have to close
with the lender that pre-approves your mortgage?
No, you don’t. 25% of
buyers don’t realize that you can shop around for a mortgage as well as for a
home, even if you’ve been preapproved. Shopping for a lender may actually save
you more than any negotiations you may make over the purchase price of the
home.

The Consumer Financial Protection Bureau has proposed
simplifying standardized mortgage forms to make it easier to compare mortgages,
but those proposed new rules haven’t been accepted yet. If you’re in the market
for a new home now, you will have a little more work to compare mortgages, but
it’s worth it in the long run! And when you’re ready to find a home, call The
Sprich Group at 616-485-0952.

Photo: Colin

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