Busting Myths & Misconceptions

Contrary to what we learned as kids, the idea that the Earth was flat back in the 15th Century was not really the prevailing belief among the scientific community – the theory that the Earth was round had been postulated and accepted LONG before Christopher Columbus came along. Chris wasn’t fighting against the intelligentsia for support of his idea that the world was round; he was, without much scientific proof, trying to convince anyone (with money) who would listen that his proposed path to the Orient was shorter and faster – and he was dead wrong. Alas, a little land mass that stretches practically from the North to the South Poles called the Americas is stubbornly in the way.

Columbus’ miscalculations started the ball rolling in developing the New World and leading to the creation of such life-enriching things like college football and deep-fried Twinkies. So, being wrong (and admitting it) opens up a lot of possibilities. Let me share just two examples of wrong thinking and how they can affect you.

There’s a VERY common misconception that anytime someone pulls your credit, you take a hit on your credit score, and most have come to accept this because they want a big-ticket item like a boat, a car, a house, or possibly a deep-fried Twinkie franchise – dare to dream! Well, at least on the mortgage side of things (and probably anywhere else that you’re dealing with a reputable institution), that’s just not true. You MIGHT get hit to the tune of ONE point, but most likely you won’t take any hit at all. I’m not entirely sure where this myth first got its legs, but let’s blame (insert a political party, reality TV show, or comic book character) just for grins. And while I don’t know where it started, I do know what keeps it alive: fear of the unknown. People allow this to be shrouded in mystery and myth because they are scared of what their credit score MIGHT mean – and that’s silly. Knowing what your score is and what it means by way of options, along with what’s contained in your report, is empowering – someone along the way has tried to take that power away from you.

Here’s another example: “free” appraisals being offered by mortgage companies. Yes, you can file this one under “Duh, I knew that,” but what most people REALLY don’t know is what’s entailed with a “free” appraisal. Obviously, there’s still a cost associated with the appraisal – appraisers do their jobs for compensation, not pats on the back or kisses from cats – and the mortgage company is going to pay for it. Let’s say the mortgage company truly isn’t wrapping the cost of the appraisal into the costs of the loan (I’ll pause here for the more cynical to groan) and that they’re willing to bear the cost as a marketing/advertising expense to attract new business. In this case, what an offer of a free service really means is the mortgage company has very limited loan products on the back end so you’re going to have to settle on one of them once you’ve been attracted by the “free” appraisal – in other words, that “free” appraisal is probably going to cost you the opportunity to get the best loan possible. If you go with a lender who offers more options and doesn’t need to rely on offering “freebies” to attract business, rather than trying to save some money on the front end of the loan, you’re going to save FAR MORE over the life of the loan – it’s a mortgage, not an Xbox.

In summary, be brave, know the truth, and know your options – those things will get you more than a deep-fried Twinkie (but I wouldn’t turn one down if offered – that would be rude).