Homebuyers have more options than they think
You can check in for a flight from your phone, deposit a check on your phone and pay for Starbucks from your phone, so why would should shopping for a mortgage be any different?
It seems the mortgage industry is a little behind the curve.
While these changes are mostly focused on the technology aspect of buying a home, the mortgage product side is changing just as much.
In a recent interview with HousingWire, Mat Ishbia, CEO of United Wholesale Mortgage, explained why 3% down mortgages are going to be the new normal.
And David Gunn, mortgage sales effectiveness director for Fifth Third Mortgage, shared five of the biggest mistakes consumers make when buying homes, along with tips to avoid them:
1. Passing up help.
There are more than 200 federal, state and local programs to assist consumers to make their down payments or pay their mortgage closing costs. Some programs are only for first-time homebuyers, others could be for veterans.
Tip: Make sure to research programs in your region. “It’s hard to research and navigate programs alone,” Gunn said. “They vary from city to city, and might only be available during certain times of the year.”
2. Believing you make too much money to qualify.
Some buyers think assistance programs are only for low-income households. Some programs assist first-time homebuyers no matter their income levels depending on where they purchase a home.
Tip: Look at programs options. For example, Gunn notes that they have a program that helps pay closing costs on homes purchased in designated low-income areas with loans financed through Fifth Third Mortgage, no matter the consumer’s income.
3. Thinking you don’t have enough money for a down payment.
The Freddie Mac Home Possible Advantage Mortgage allows homebuyers to put down 3%. This will allow the majority of borrowers to enter this program with no cash out of pocket for the down payment.
Tip: Work with your mortgage loan originator to see which programs can help you qualify. “People tell us they can’t afford a house because of the down payment,” Gunn said. “It’s the most common barrier to buying a home. But we find that a buyer needs less money than she thinks to get into a home with a monthly payment that meets her budget.”
4. Clinging to outdated ideas on closing timelines.
Closing times are lengthening. And that can be a good thing. The Know Before You Owe rule enacted by theConsumer Financial Protection Bureau went into effect, and has extended the timeline on most home closings. The rule created documents that detail how much a buyer will pay for closing costs, how much each monthly payment will be, and how payments or rates could potentially adjust. Any change to these terms must be given to borrowers with 3 days to review, which is different from the past when changes could be made to the loan before and during closing without a wait.
Tip: “Be patient,” Gunn said. “And know that all of the changes are made to help you better understand the mortgage terms and help you find the best loan for you.”
5. Relying on a one-size- fits-all loan.
Many homebuyers likely had a 30-year-loan on their last house. But it’s not the default loan anymore. For each purchase, loan originators look at the buyer’s financial situation and goals, and might suggest a loan with a shorter term.
Tip: Work through the financials on several options with your loan originator to see what puts you in the best financial position to meet your family’s goals. “It might be better to get a lower term loan now to build equity, and then move into something bigger in a few years,” Gunn said. “We want what is right for you.”