We’ve all heard a lot of mortgage advice from friends, finance gurus, and other sources. Some of it is good, but a lot is just bad. Whether outdated, too simplistic, or just wrong, these mortgage myths may cost borrowers time and money.
Myth 1: You need a 20% down payment, no matter what.
Although a sizable down payment will reduce the overall amount of money a buyer needs to borrow, trying to save 20% can keep people in unsustainable high rents for years longer than necessary.
Use borrower stories to share how much people are actually putting down when they close a mortgage loan with you. These real-life examples will show that low and no down payment options are both available and realistic for average borrowers, not just people in particular situations.
Myth 2: Never take a mortgage longer than 15 years.
Although a 15-year mortgage can save money in interest, it will require a higher monthly payment. Different mortgage lengths will better suit specific borrowers.
To help your potential borrowers understand what will work for them, prepare comparison sheets that show the monthly payment, mortgage term, and the total amount paid over the life of the loan for standard housing prices in your area. That will help borrowers see the big picture and decide what type of loan will make the most sense, whether it’s 15 years, 30 years, or somewhere in between.
Myth 3: Find a house first, then worry about finding a mortgage.
In a fast-moving housing market, many sellers won’t even entertain offers from buyers who don’t have mortgage pre-approval. So many potential buyers have already taken care of that, and because many sellers are also in a contingency contract for their new home, they just don’t have time to wait for borrowers whose funding may fall through.
Advise potential borrowers to come to you for pre-approval before they even look at homes. You can share this piece of advice in educational presentations, on social media, or in media interviews.
Myth 4: If your lender approved you for that amount, go ahead and spend it.
When housing prices are high, it can be tempting to simply use your pre-approval amount as your housing budget. And borrowers probably can make the monthly payments work, but setting a realistic budget based on local housing prices and their current income will better serve them. That budget may be less than their pre-approval amount, and you can help reassure them that it is okay.
Those comparison sheets you created for different loan lengths will be helpful, as will information about other expenses new homeowners don’t always think about, such as property taxes, repairs and maintenance, homeowners insurance, and homeowners association fees.
Myth 5: Your credit needs to be absolutely perfect to qualify for a mortgage.
This one is pernicious. And it also keeps many potential homeowners in rentals for much longer than is necessary.
Real borrower stories can help dispel this myth. Sharing stories of borrowers from all different incomes and credit profiles will ensure that potential borrowers see people like them getting a mortgage and moving into a home that will build equity and value for them. Video recordings on social media and your website will be helpful tools to ensure that potential borrowers can find them. You might even start a YouTube channel to share these and other videos about your local home market.
With a bit of work, you will find that you can help your potential borrowers stop listening to bad advice — so they can finally get into a home they love.
Check out EPM’s product offerings here to learn more about mortgage lending options — another way EPM empowers people more.
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