#FakeNews and Mortgage Lending: Learn The Truth and Save Big on New Homes



It’s been the most popular hashtag of the past few years: “#FakeNews.” Reach Home Loans is definitely not going to get into a political conversation here, but we know that there is plenty of #FakeNews floating around the internet, especially when it comes to our industry—mortgage lending.


Sometimes believing #FakeNews makes you look dumb on your Facebook page, but that embarrassment will pass within a few days. If you believe #FakeNews when looking for home financing, you may spend years paying for it…in literal dollars.


Here are four common beliefs about getting a mortgage that too many people believe. When you know the truth, you might be able to save!


The lowest rate is your best option, no questions asked…#FAKENEWS

Comparing lenders and mortgage options is an involved process. It makes sense that you might start by looking at various rates online. But should you automatically choose the lowest one? No.


The difference between Fixed Rate and Adjustable Rate Mortgages is a classic example. Let’s say that the rate for a 30-year fixed rate mortgage is 6.25%. The adjustable rate for a 30-year mortgage will change depending on economic factors, but it will also include a fixed period for the first 5 or 10 years. This rate will be lower, maybe 5.25%. This will make it tempting to take the ARM…but you must think about the life of the loan. Sure, you’ll pay less overall during the first five years, but future rates are impossible to predict. What are the odds that you’ll end up paying less over the 30 years?


FHA mortgages can also end up costing more. They require less money down at purchase, which means a higher principal (amount borrowed). This means can ultimately mean more paid in interest over the life of a loan, even if the rate is lower.


Make sure it’s real before you buy in.


Being Pre-Approved for $350,000 means I can get any home worth $350,000…#FAKENEWS

Unfortunately not. A Pre-Approval is made with the assumption that you are purchasing a new home. Of course, many people are not moving into a new home, and that changes the closing costs.


For example, let’s say you are looking at two homes, which both cost $340,000, but one is 75 years older than the other. You might not be able to afford the older home, once the higher homeowners insurance costs are considered. But maybe the new home comes with hefty HOA fees. Now you can’t afford that one either.


Be sure to understand fees and closing costs when working with a mortgage Pre-Approval.


I know all about fees. Like, mortgage insurance. I know that this is a requirement when borrowing for a home. #FAKENEWS

There are many ways to avoid paying for mortgage insurance when financing a home. The most popular is to make a down payment worth at least 20% of the home’s value. Even if you don’t have that much cash to put down, there are many other ways to get out of paying for mortgage insurance. Check out this post to learn how you can get into a home for as little as 0% down!


Mortgage rates are going up right now. It might be a good idea for them to drop back to the normal rates. #SUPERFAKENEWS

This is a comment we hear most often from Millennials, or those who have recently become able to buy a home. Young people may have started considering interest rates when they reached historic lows during 2015. These rates, below 4%, were far from normal and it will be a very long time before they get there again. If you are considering buying a home, it will benefit you to pursue financing sooner than later, because rates will continue climbing upward before they drop down again.


Can we clear up facts about any other aspect of the mortgage industry for you? Want to know if the headlines you’ve seen are real or #FakeNews?


Contact us and we’ll be happy to help you out!

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