October 25, 2022 | Sexton Real Estate Group
Mortgage rates are a hot topic right now. As interest rates continue to rise, more and more people are becoming interested in refinancing their mortgages. However, there are a lot of misconceptions about mortgage rates. In this blog post, we will dispel five of the most common myths about mortgage rates!
Myth #1: Mortgage Rates Are Rising Because The Economy Is Improving.
Mortgage rates and the stock market are not directly linked. While it is true that the stock market has been doing well recently, this is not the main reason why mortgage rates are on the rise. The main reason for increasing mortgage rates is actually due to inflation. As prices for goods and services continue to rise, so do interest rates.
Myth #2: You Need Perfect Credit To Qualify For The Best Mortgage Rates.
Your credit score is one factor that lenders consider when determining your mortgage rate. However, it is not the only factor. Lenders also look at factors such as your employment history, your income, and your debt-to-income ratio. So, even if you have less than perfect credit, you may still be able to qualify for a great mortgage rate.
Myth #3: You Need A 20% Down Payment To Avoid Paying Private Mortgage Insurance (Pmi).
Private mortgage insurance is an insurance policy that protects the lender in case you default on your loan. Lenders typically require borrowers to pay PMI if they have less than 20% equity in their home. However, there are ways to avoid paying PMI even if you have less than 20% equity. For example, some lenders offer “piggyback” loans which allow you to take out a second mortgage for the difference between your down payment and 20%.
Myth #4: You Should Only Refinance If You Plan On Staying In Your Home For At Least Five Years.
The rule of thumb used to be that you should only refinance if you planned on staying in your home for at least five years. However, with today’s low mortgage rates, many people are refinancing even if they don’t plan on staying in their home for that long. The reason is that the savings from refinancing can often outweigh the costs of doing so, even if you only stay in your home for a few years.
Myth #5: You Should Wait Until Mortgage Rates Go Down Before Refinancing.
If you are thinking about refinancing, don’t wait for mortgage rates to go down. Rates are already at historic lows and they are not likely to go much lower. If you wait for rates to go down, you may end up missing out on the opportunity to save thousands of dollars.
Other Myths About Mortgage Rates
Aside from the five myths listed above, there are a few other misconceptions about mortgage rates that we want to dispel. First, many people believe that they need to have perfect credit to qualify for the best mortgage rates. This is not true! As we mentioned before, your credit score is just one factor that lenders consider when determining your mortgage rate.
Second, some people believe that they need to have a 20% down payment to avoid paying private mortgage insurance. However, there are ways to avoid PMI even if you have less than 20% equity in your home. Finally, many people believe that they should only refinance if they plan on staying in their home for at least five years. However, with today’s low mortgage rates, many people are refinancing even if they don’t plan on staying in their home for that long.
We hope this blog post has helped to dispel some of the myths about mortgage rates. If you have any questions about refinancing your mortgage, we would be happy to answer them. Contact us today to speak with a loan officer.
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