How do you debunk common mortgage myths for clients?

Unfortunately a lot of first time home buyers and even some repeat home buyers believe that a 20% down payment is required. Interestingly, many of the same home buyers also have heard of mortgage insurance (PMI) but they don't know what it is for. Assuming a buyer qualifies for a home loan, if they pay mortgage insurance they are able to purchase a property with a down payment that is less than 20%. Mortgage insurance is an insurance policy that pays the lender money to reduce their losses if they have to take the home through foreclosure. Because of this insurance policy many people buy homes with minimal or even sometimes no down payments. The down payment depends on the loan program, credit score and other factors.

You don't need a perfect credit score however it's important and can affect your ability to secure a Loan. If your score is average / poor or credit report is impaired, you will pay a higher interest rate and possibly a risk fee depending on the lender. In Australia there are three main credit reporting agencies. One of the first things we do after engaging with a client is run a Credit report, send to the client and explain how the report works in regards to their score. As the article states, you can still secure a loan with an average credit score however your lender options (Australia) are somewhat limited and it is going to cost you $. Seek out a trusted Mortgage Broker to discuss !!

This myth is best combated with math. Illustrate how long it will take to save up the additional funds to "make it" to 20% down and compare it to the cost of inflation. I've found very few buyers understand that the cost of mortgage insurance is risk based. If you have great credit the PMI can be relatively inexpensive on a conventional mortgage. I rarely even explain that 20% absolutely does not get a typical buyer the best rate on a 30-year fixed conventional mortgage. It is too much for most people to process and contradicts strongly held beliefs, but because of loan level pricing adjustments the cost of a mortgage is higher at 80% financed than 75% or 85%....

I always advise potential homebuyers not to liquidate all their funds to get into the home, if they don't have to. It is amazing how many people think they need 20% down. You can get into a home with 0 down if there is a program like that in your area. Homebuyers don't realize how more money down affects the payment in a minimal way. If you give them the figures on 20% down vs 10% down, for example, they will see that they are letting go of a lot of money for not a whole of of savings on the monthly payment. PMI is very inexpensive anymore, especially with good credit. FHA has reduced their monthly MIP. There is a huge misconception out there about PMI still.

Right now, the interest rate for a USDA zero down payment loan is lower than a Conventional 20% down payment loan. I recommend that buyers request to see if they qualify for a USDA loan.

In 20 years, I am yet to see a perfect credit score. In Australia not all banks complete credit rating checks. One benefit of using a mortgage broker is we have access to 50+ banks and can recommend a bank that will welcome you with open arms! ??

No es cierto. A casi todos mis clientes que compran su primera vivienda, les hago el plan de viabilidad y si considero que la hipoteca es potencialmente viable la tramito a mis bancos de confianza, obteniendo así la aprobacion. Es decir que son clientes que previamente no eran clientes ni tenían historia en el banco donde les he conseguido la hipoteca concedida.

There’s many quick and easy ways to improve your credit score that a good lender will suggest to you as a borrower. Additionally, lenders will often ask for a letter of explanation for anomalies on a credit report. Your credit score is important however what’s more important is finding a loan officer that is willing to take the time to work with you to secure the best loan program and rate. As a Realtor I always have my go-to’s that I know and trust. There are so many trustworthy advisors in our industry, it is to a buyer’s benefit to connect with one very early on in their home search.

While having a higher credit score does certainly help with interest rates, it is not the sole factor in getting a loan. Some actions that help your score including paying your credit cards and phone bills on time, low utilization rate, and not constantly opening new loan requests.

An experienced mortgage lender can recommend different programs for buyers with lower credit scores. The lender can also give the buyer the knowledge and expertise to teach the buyer how to improve their score. Sometimes it may take a few months but the buyer will be in a better position in the long run if they just take the time at the beginning to talk with an expert to see where they are in the process. If you don't know, then that is when you might be discouraged to apply. Once you have the information, that gives you the power to make changes and move towards homeownership. Your realtor can refer you to an experienced loan officer who can help you get things done.

I usually recommend a 30-year fixed mortgage, since new and inexperienced buyers feel more secure with that type of loan program. It also may be necessary to use a particular first-time homebuyer program to qualify them, which are normally 30-year fixed programs. If a buyer is a little more sophisticated, has good income and specific goals, a 15-year fixed rate or a Hybrid ARM, might be viable options to consider. In most cases, I will give a buyer 2 to 4 different options to discuss and consider, explaining the pros and cons to each one. Besides being able to qualify, you want them to feel comfortable and understand the program that they are choosing. I am there to advise and guide them, but ultimately the final decision is theirs to make.

The wisdom of a getting a 15 year mortgage over a 30 year will depend on current rates, on the spread between those two rates, financial resources and financial stability. I find that clients are often better off taking a 30 and paying it as a 15. There is an interest cost for this over the life of the loan but the reduced monthly obligation can be helpful when life throws you a financial curve.

If you can afford to pay your mortgage off in 15 years that is always going to save interest over 30 years, regardless of the rate difference. However, I wouldn't force the shorter amortization unless you are getting something in return (lower rate.) If the difference is minimal simply taking the 360 months and setting up a payment for 180 months allows future flexibility.

ARMS have a negative stigma to them still, for the most part. If the buyer is in it for short term, then they can benefit from that. Anymore, many ARMS don't have that much better of a rate than a fixed rate they can get at the time, so there is no point in taking the risk on it. 15 years loan, I would only recommend for an experienced homeowner. You can take a 30 year loan and pay it off in 15 years if you want. The payment at that same rate is no different than if it was written that way. The 30 year rate is a bit higher than the 15 year rate, but the faster you pay it off, the less difference the rate makes and this way you are not bound to the higher payment in case something happens down the road.

Fear of ARMs! It's a thing. Buyers' aversion to adjustable rate mortgages or short-term fixed loans is almost as strong -- and much less justified -- as concern over a reverse mortgage. (Even reverse mortgages have their place in the financing arsenal.) My main approach with clients is to sit down and do the worst-case math. In almost every case, they then choose NOT to go for a 30-year fixed. I'm a 35-year real estate industry pro and, honestly, during that whole time I've yet to hear more than one or two past clients regret having gotten an ARM.

In today's market, interest rates are unpredictable, and borrowing capacity is limited. It's critical to understand your financial limitations.This approach is not only financially savvy but also positions you as a committed and well-prepared buyer. In a highly competitive market, a pre-approval gives a significant advantage, demonstrating readiness to make a swift and confident offer. Don't underestimate the value of being financially prudent and empowered during the home search. It's essential to stay within the budget and avoid emotional decisions that may lead to financial strain. By being mindful of one's limits, one can avoid disappointment and ensure a successful and fulfilling homeownership journey.

Always better to get pre approved before you actually shop. If you are just looking online and not going into homes, than not so much. If you are trying to physically look at homes, for sure get pre approved. There is usually no cost to do it and there is no obligation to follow through and actually purchase. I have seen many times, someone look at a home on Friday afternoon and it turns out to be the perfect home. Now they need a letter ASAP to make their offer. Get it in advance and you will be more prepared all the way around.

I have recently produced a simple to understand First Time Home Buyers Guide. The first thing is to find a Realtor with knowledge in the local area you are searching and have them recommend a few different lenders to get you prequalified for a home loan. Without the prequalification, the buyer has no idea how much they will qualify for, what their payments will be, etc. After the buyer has the prequalification, they can start searching for homes, and they will be ahead of other buyers who may want to offer on a home they are interested in. Sellers will want to see the buyers pre qualification letter prior to accepting their offer.

In the past it was common for buyers to start searching for homes and making offers before talking with a lender. In today’s market, that is no longer the case. One of the first things that a buyer’s agent will ask, is if you have been pre-approved by a lender. Buyers may not be able to even see a home or schedule an appointment without providing a copy of their pre-approval letter. Many listing agents are requiring that, no matter the price range, so it is necessary to get pre-approved ahead of time. It also ensures you are "mortgage ready" and helps you understand the process and the requirements. Bottom line is, you need to be prepared to make an offer and to give yourself the best chance of securing the home you want when you find it.

I agree whole heartedly with all that is said here. I would add that if you are out looking at the wrong price range then you are simply wasting your time and will be in for a rude awakening. Getting pre-approved arms you with the information about how much a certain price range of home will require as far as closing costs and down payment but also a monthly payment. You could be shooting too low or too high. Seek professional help!

The first thing I'd suggest to any prospective mortgage client when considering the validity of the information they're consuming is; Consider The Source. Are you getting all of your information from an uncle that purchased a home 28 years ago, or second hand sources? Reading outdated blog posts you found through Google? Sure, do your own research, consult with relatives and people you trust regarding their home buying experience before purchasing a home. However, before you make up your mind on anything regarding mortgages, consult an experienced mortgage expert in your area.

Simply get good advice from trusted professionals with an excellent track record. They are not there to tell you what to do but rather guide you to making well informed decisions for your short and long term financial goals.

While the current market features elevated rates, it's important to note the limited inventory available. What potential buyers might not fully grasp is the inverse relationship between interest rates and property prices. As interest rates decrease, property prices tend to rise. Therefore, seizing the opportunity to acquire a property at present rates could prove advantageous, as you'll have the option to refinance the mortgage at a later point to secure a more favorable rate.

The best way to take the fear out of financing is by using an experienced Loan Officer that has personal referrals from real estate agents or clients that have used their services. There are so many lenders in the market today from Mortgage Bankers and Brokers, find a Loan Officer that will explain all your options and program choices as you will have many. Get a clear and concise Loan Estimate before making a decision and make sure your Loan Officer knows how to communicate effectively with all parties. Your Loan expert should return your call promptly, communicate with you throughout the loan process and walk you hand in hand to the closing table!

Some people are waiting for a better credit score, but purchasing a home may be the best way to do just that. Others might choose to wait until they’ve built up enough for a 20% down payment in order to obtain a great loan program. However, with prices rising, they may just need to get into a house, fix it up, and sell it. Testing the waters in this way, they can keep focused on positioning themselves to purchase their next home, until the day that they find their forever dream home. Surprisingly, people may wait in order to pay down their debts before investing in a home, when building equity in a home might be the answer.