By Mike Miles
Halloween is nearly here already. That means television networks think it’s a good idea to play the new Halloween movie (Michael Myers) trailer during the late afternoon football games on Sundays. Really? I mean little kids are most likely still watching. While on this brief topic, anyone see the Worlds of Fun Halloween Haunt commercial? Ummm, nightmares for a week.
Let me get back on topic. To match the timing of the year, I thought I would write about why getting a mortgage can seem scary. The key word in that last sentence is “seem.” So let’s debunk some perceptions.
1. My credit score is too low:
Most people’s credit scores are better than they think. According to Ellie Mae, the average conventional loan borrower has a score of 751 and the average government loan (FHA VA, USDA) borrower has a score of 679. Scores typically need to be above 580 to qualify.
2. I don’t have enough for a down payment:
Many people still think you need 20 percent as a down payment. It’s not true. Depending on the loan type it’s possible to put as little as 0 percent down. Conforming loans even allow for as little as 3 percent for a down payment.
3. I have too much debt:
Debt-to-income ratio guidelines allow as high as 50 percent in most situations. This is more buying power than anyone would need. We don’t suggest borrowers push the max, but this does allow the ability for consumer debt (student loans, car loans, credit cards) to not prevent home ownership.
4. The loan process is long and terrible:
It certainly can be if you’re working with the wrong bank. A great company can close loans in less than 30 days without constantly nagging you. Fountain Mortgage averages 20-day closes.
5. I am going to get a high interest rate:
While it’s true that 30-year mortgage rates have passed the dreaded 5 percent barrier, they are still near historic lows. It was just a few years ago (2014) that we touched this same level. And the mortgage loan rate over the last 30 years has averaged 8.5 percent. Many of us got spoiled with rates under 4, making anything close to 5 seems like a financial catastrophe. It’s not.
6. My rate will adjust:
Adjustable Rate Mortgages (ARM) are not very popular. With rates still very low, there isn’t much need for these products. That said, if a borrower chooses an ARM product, compliance today allows for numerous layers of disclosures to help borrowers understand the adjustments.
7. I’ll get denied before I close:
If you work with the right company … you won’t. We hear of horror stories about this happening and it’s because other companies do pre-qualifications versus pre-approvals. There is a huge difference. Pre-approvals identify any “gotchas,” where pre-qualifications don’t. Fountain Mortgage does pre-approvals.
We understand the perceptions associated with getting a mortgage, and we don’t discount these concerns at all. However, your level of stress can either be eliminated or escalated depending on which company you work with. Choosing a company like Fountain Mortgage that has won awards due to its people, processes and products (Fountain Mortgage Voted Best Mortgage Company 2017 & 2018 – The Pitch) will provide you tremendous peace of mind.
This weekly Sponsored Column is written by Mike Miles of Fountain Mortgage. Located in Prairie Village, Fountain Mortgage is dedicated to educating, and thus empowering, clients to make the best financial decision possible for their situation. Contact Fountain today.
Mike Miles NMLS ID: 265927; Fountain Mortgage NMLS: 1138268