How borrower education can make housing more attainable
Most buyers will require financing to purchase a home. This will involve either a purchase contract contingent on getting an affordable mortgage or knowing if an affordable mortgage is available prior to making an offer. In a competitive market, not knowing the financing prior to making an offer puts a buyer at a disadvantage. Winning Mortgage, Winning Home is the best resource for borrowers. Borrower education proves vital is getting the right mortgage. The right mortgage means the best rate, the most appropriate amount, the right down payment, and the correct payment term. Yet many, many buyers do little homework, reading or preparation. As a result, regret appears rampant.
According to Fannie Mae, the largest US lender with a portfolio in excess of $3 trillion and making more than $50 billion of home loans each month, today’s U.S. housing market is leaving many prospective home buyers priced out. As a result, 55% of future home buyers believe that home ownership is out of reach for them financially.
Affordability
However, while affordability and supply constraints have weighed on many prospective home buyers, home ownership education is needed. In the same study, future home buyers were asked to demonstrate their knowledge of the mortgage process and the affordable options available. Among respondents, 73% were unaware of lower down payment options that range from 3% to 5% of a home’s purchase price.
In addition, 31% cited not being able to come up with a down payment holding them back from home ownership. Couple this with a 2018 Fannie Mae survey where many didn’t understand the minimum credit score necessary to qualify for a mortgage and this knowledge disconnect impedes home ownership.
Home Buyers Rely on the Wrong Sources for a Mortgage
Fannie Mae found that 64% of future home buyers mistakenly expected lenders to educate them and 63% expected the lender to tell them the specific right loan! The lender will not necessarily put you is the right mortgage. The lender doesn’t know all of your circumstances and spending/budgeting/savings like you do. Don’t rely on a lender to choose for you. Choose borrower education.
In addition, a majority of buyers also rely on a real estate agent to find a lender. Your real estate agent only has minimal expertise and experience in mortgages, if any. And, that real estate agent has limited contacts in the mortgage business. The real estate agent likely might refer you to a friend or to a loan officer where there may be a financial interest in the referral. Real estate agents and mortgage lenders cross refer in order for both to increase business. That isn’t illegal. However, that may not get you the best agent or loan officer for your particular circumstances.