Halloween is nearly here! That means television networks think it’s a good idea to play scary movie trailers during the late afternoon football games on Sundays. My kids are afraid of both monsters under the bed AND ones under the couch during Chiefs games now. But 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, and the key word in that last sentence is “seem.” So let’s get to debunking some perceptions.
- 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.
- I don’t have enough for a down payment: Many people still think you need 20 percent as a down payment. It’s just 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 three percent for a down payment.
- 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 likely 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.
- 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 sub-30-day closes.
- I’m going to get a high interest rate: Mortgage rates are still at historic lows, and the mortgage loan rate over the last 30 years has actually averaged near 8.5 percent. Many of us got spoiled with rates in the twos, making anything close to three seem like a financial catastrophe. It’s not.
- 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.
- I’ll get denied before I close: If you work with the right company, you won’t. We hear 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” while pre-qualifications don’t, and 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 (The Pitch’s Best Mortgage Company 2017/2018/2019 and KC Business Journal Champions of Business Honoree 2021) due to its people, processes and products 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