Dealing with mortgages should be a simple topic, but myths and misinformation spreading tends to mess with the general idea. There is a lot of confusion surrounding finances, and mortgage is no exception. However, you can weed out the myths with a little bit of fact checking. If you’re looking for a way to save money on your mortgage, the first step is understanding the misconceptions.

Here are the top misunderstandings about mortgages you need to know about:

1. “Prequalification and Preapproval Are the Same.”

When you apply for a preapproval, your lender verifies some of your financial information. Lenders typically ask for bank statements or allow them to view your credit report before issuing a preapproval. A preapproval is a more accurate estimate of loan eligibility than a prequalification. The main difference between prequalification and preapproval is the level of verification your lender does before they issue you an estimate. 

A prequalification estimates how much you can afford based on self-reported financial information; many lenders rely only on this data when they issue prequalifications. A preapproval means that the lender has verified at least some of your financial information before issuing a final estimate of loan eligibility.

Each lender handles preapprovals and prequalifications differently. Some lenders use the terms “prequalification” and “preapproval” interchangeably, verifying inaccurate assumptions about your personal finances.

Remember that even with a preapproval, closing a loan isnt guaranteed. After you make an offer, you still need an appraisal before you can receive an actual mortgage.

2. “You Cannot Pay Your Mortgage Off Earlier.”

A prepayment penalty is a clause that penalizes you if you pay off your loan sooner than expected. A lender earns money from the interest you pay on the principal you borrow. The longer you take to make payments on your loan, the more money your lender earns in interest.

Traditional prepayment penalties are less common than they once were; many lenders even offer loans with no prepayment penalties at all.

3. “Closing Costs Are Part of the Down Payment.”

When you’re buying a home, you may wonder how much money to set aside for your down payment. It is usually the largest payment you’ll make when you take out a home loan, but you’ll also need to pay other charges. These charges are called closing costs, and they cover the price of your appraisal and your title insurance, among other things. You’ll pay this fee when you’re done with the loan.

Closing costs are independent from your down payment, and they can range from 3% to 6% of the total loan balance. If closing costs are too expensive for you, your lender may allow you to ask the seller to cover a percentage of them. This is called a seller concession.

Conclusion

It is crucial to fully understand what mortgage is, who to trust with it, and how it is all going to fit in. A mortgage is a big deal, and it is wise to understand what exactly you are doing before committing to a considerable investment. Fact-check what you learn, and stay vigilant!

Our team will help you get the home you want. Just tell us what you need, and we’ll help you get it. Get your mortgage loan in Utah from us today!