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They may sound like good advice at first, but once you scratch the surface of these six common mortgage myths, you could find a different story. Don’t let these misconceptions keep you from your dream of owning a home.
Fact: Though popular, this type of mortgage may not be ideal in every situation. For example, if you only plan to stay in your house for a few years, you could save money with an adjustable-rate mortgage—which may have a much lower initial interest rate. A 15-year fixed-rate mortgage is an option for those who can handle higher monthly payments; making 180 payments versus 360 will save tens of thousands of dollars in interest over the life of the loan.
Fact: Putting 20 percent down is ideal, but not having it isn’t a deal breaker—there are loans that require much less. But when you put down less, you’ll probably have to pay for private mortgage insurance, or PMI. It protects the lender if you default on the loan, and the cost is tacked onto your monthly payment until you reach 20 percent equity in your home—at which time you can cancel your PMI.
Some expenses that come with buying and owning a home could surprise you. Don’t be caught off guard follow these tips to create a monthly budget to save for life's surprises.
Read moreFact: No doubt, the interest rate is important, because it affects the size of your monthly payments. But it doesn’t take into account other costs associated with the loan, such as closing costs and points (fees paid directly to the lender in exchange for a lower interest rate). A better measurement for comparing loans is APR—the annual percentage rate. It factors in all those extra charges and represents the total cost of the loan.
Fact: Having good credit is a major factor in getting approval for a mortgage—especially one with a low interest rate. But lenders will review your entire financial situation, and home shoppers with less-than-perfect credit scores often can still qualify for a loan. Just be prepared to pay a higher interest rate. To increase your chances of getting a better rate, take steps to improve your credit score—like paying down debt and paying bills on time—before shopping for a home.
Fact: When you first begin looking for a home, getting pre-qualified for a mortgage can give you a general idea of what you can afford. But it’s only based on preliminary numbers—such as your stated income, assets and debt—and it’s not guaranteed.
The preapproval process is much more in-depth. Your lender will analyze your credit score, verify your income and assets, and gather all the necessary documentation to submit the loan to an underwriter for review. Having a preapproval letter—a commitment from your lender to loan you a specific amount—puts you in the best position to make an offer on your next home.
Fact: While it never hurts to make extra payments and reduce the principal on your mortgage, it might not always be the best use of your money. If you have high-interest credit card debt, it’s a smarter move to pay that off first.
Or, if you have a retirement account that will earn, say, 6 to 8 percent in interest, putting your extra money there might be a better long-term investment. Additionally, depending on your situation, mortgage interest may present certain tax advantages, and you may want to consult a tax advisor.
Annual Percentage Rate (APR)
We may change APRs, fees, and other Account terms in the future based on your experience with ACG Card Services and its affiliates as provided under the Cardmember Agreement and applicable law.
1Cash back can be redeemed in the form of a statement credit or ACH deposit ($25 cash back minimum redemption). Cash back is not earned on business related transactions or activities. You may not redeem cash back, and you will immediately lose all of your cash back, if your account is closed to future transactions (including, but not limited to, due to Program misuse, failure to pay, bankruptcy, or death). Cash back will expire at 11:00 p.m. Central Time on the last day of the calendar quarter that is five (5) years from the date on which they are earned. Account must be open and in good standing to earn and redeem rewards and benefits. Upon approval, please refer to your Cardmember Agreement for additional information. Cash back is earned on eligible net purchases. Net purchases are purchases minus credits and returns. Not all transactions are eligible to earn cash back, such as Advances, Balance Transfers, and Convenience Checks and other advance transactions as defined in the Cardmember Agreement, as well as interest charges and fees do not qualify. U.S. Bank cannot control how merchants classify their business or transactions and reserves the right to determine which Purchases will qualify in which category. Earn 2% per dollar for qualifying net purchases made with the card through any participating AAA Club when AAA is the merchant of record, on qualifying net insurance purchases (MCC = 6300) and at eligible retail travel merchants. AAA Clubs located in Northern California, Nevada and Utah are not participating AAA Clubs and purchases made at those clubs will not qualify for 2%. Earn 4% per dollar for qualifying net purchases on AAA purchases, travel and insurance for your first 6 months up to $6,000. After that, earn cash back in the standard 2% category. Foreign Transaction Fee: None.
2 Benefits are subject to terms, conditions, and limitations on the amount of coverage. Travel and Emergency Assistance Services help in coordinating medical, legal and travel services while away from home. Rental Collision Damage Waiver coverage and peace of mind for damage due to collision or theft of most rental cars. Certain terms and conditions apply. Please refer to your Visa Guide to Benefits for details
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This card is issued by U.S. Bank NA dba ACG Card Services, pursuant to a license from Visa USA Inc. Equal Credit Opportunity Lender
*Annual Percentage Yield (APY) is valid as of 11/26/2024. Personal accounts only. Rates are variable and may change without prior notice. $100 minimum balance to open and avoid fees. Fees may reduce earnings. $250,000 maximum opening deposit when account is opened online. After online opening deposit is verified, you may deposit additional funds to your account. $500,000 maximum balance. Auto Club Trust, FSB.
**Annual Percentage Yield (APY) is accurate as of 11/26/2024. Rates are variable and may change without prior notice. Interest rates are fixed until initial maturity after the account is opened. A $1,500 minimum deposit to open the account and obtain the APY is required. A penalty may be imposed for early withdrawal. Fees may reduce earnings. Personal accounts only.
†Annual Percentage Rate (APR). Rates and terms effective as of 10/11/2024. APR is accurate as of 10/11/2024. Advertised rates and terms are subject to change without prior notice. Additional terms and restrictions may apply. Other loan rates available. Subject to borrower qualification. Advertised rate includes a 0.25% discount when you set up automatic payments from any checking or savings account. Rate is variable. Offer valid on personal vehicle loans only. Criteria to receive the stated APR: Loan term 48 months or less new or used, model year 2018 – 2024 with a credit score of 720 or higher based on the Vantage scoring model. Buyer is responsible for all state or local fees. Auto Club Trust, FSB uses a managed credit program and final APR is dependent on your credit score. An auto loan with an APR of 5.49% for a $20,000 loan at a term of 48 months, your estimated monthly payment would be $465. An auto loan with an APR of 5.74% for a $20,000 loan at a term of 48 months, your estimated payment would be $467. Private party sales will not be financed.
††Terms and Conditions apply. Offer valid for loans on vehicles purchased through the AAA Auto Buying Program from a TrueCar, Inc. (TrueCar) Certified Dealer; and approved and funded by Auto Club Trust, FSB. Applicant must submit the Member Price Summary provided by TrueCar during the application process. Must be an active AAA member to receive the additional TrueCar discounted rate. Loans offered by Auto Club Trust, FSB. Equal Opportunity Lender.
Member Savings currently not available in all states. In these states a "Target Price" is presented, which reflects a market-based example of what you can reasonably expect to pay for a vehicle configured with your desired options. Your configured vehicle may not be available or in-stock at the Certified Dealer.
TrueCar operates this information website ("Service") featuring pricing, performance, technical, and safety data available for new and used vehicles. The Service is not available in all locations.
Products are offered by Auto Club Trust, FSB. Equal Credit Opportunity Lender.
Mortgages originated by Auto Club Trust, FSB. Equal Housing Lender. NMLS# 799629
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