How Your Clients Misunderstand Mortgages

I found this bit of info important to share. Before a buyer looks to purchase a home the buyer should understand the total process involved from start to finish. The first step a buyer should take is find a competent and knowledgeable real estate Agent. Especially if a buyer does not understand obtaining a mortgage. According to the information there are those that think they fully understand mortgages.

Americans significantly lack understanding about minimum mortgage qualification criteria, particularly renters who plan to buy a home within the next five years, according to a survey of 3,868 consumers by Fannie Mae’s Economic & Strategic Research Group

When asked about key mortgage qualification criteria — down-payment percentages, borrower’s credit scores, and debt-to-income ratios — about half of consumers answered with “don’t know” or failed to provide a valid answer, according to the survey.

For those consumers who did provide an answer, many respondents thought the requirement for a minimum down payment was four times larger than Fannie Mae’s actual figure of 3 percent. When it came to minimum credit scores, many thought the requirement was 652 — when in actuality, Fannie Mae’s requirement is 620.

The survey also showed, not surprisingly, that consumers cite lenders as one of the most influential sources of mortgage information, but real estate professionals follow closely behind along with family and friends.

Prior Fannie Mae surveys have shown that “the aspiration to own a home remains strong and that consumers perceive the down payment and their credit scores as leading obstacles to obtaining a mortgage,” notes Mark Palim, Fannie Mae’s vice president of Applied Economic and Housing Research. “Advancing from aspiration to sustainable home ownership is more likely to occur if consumers have an accurate understanding of the requirements to qualify for a mortgage. While it can take years to improve one’s credit score or save for a down payment, undertaking such efforts based on inaccurate information may lead to a needless delay in reaching the goal of owning a home.”  Source: Fannie Mae

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NAR to Congress: Ease Up on Mortgage Credit

Credit-worthy borrowers are being denied a chance at home ownership due to “unnecessary regulatory burdens” that are preventing them from qualifying for a mortgage, National Association of REALTORS® leaders testified Thursday before the U.S. Senate Banking, Housing and Urban Affairs Committee.

“REALTORS® support strong underwriting standards to protect consumers from the risky lending practices of the past, but we are concerned that the pendulum has swung too far,” NAR President Chris Polychron testified. “In some cases, well-intentioned, but over-corrective policies are severely hampering the ability of millions of qualified buyers to purchase a home. I believe, and our members believe, that we have yet to strike the right balance between regulation and opportunity.”

Mortgage rates continue to hover near historical lows, yet the number of first-time buyers entering the market is at its lowest point since 1987. The number of homes purchased annually is less than 70 percent of what was purchased prior to the real estate boom and the subsequent collapse, NAR states.

“No one wants to see a return to the unscrupulous, predatory lending practices that caused the Great Recession, but some modifications to existing regulations would help restore the home ownership rate to pre-bubble levels,” Polychron said.

Polychron proposed adjustments to several regulations that he said would still ensure safe access to mortgage credit. For example, he urged changes to restrictive condominium polices from the Federal Housing Administration and the Government-Sponsored Enterprises, which he says are limiting opportunities for buyers to own condos. Condos often represent the most affordable buying options for first-time home buyers and minorities

Polychron also urged the Consumer Financial Protection Bureau to conduct more lending from responsible community banks and provide more flexibility for lending in small specialty markets, such as rural communities.

Polychron voiced the association’s support of the Mortgage Choice Act, bipartisan legislation that redefines a provision in the Ability-to-Repay rules that limits mortgage fees and points to 3 percent in order for home loans to be considered “Qualified Mortgages.” Polychron urged the Senate to approve the legislation.

Currently, the rules “unfairly prevent consumers from obtaining Qualified Mortgage loans through certain affiliated lenders whose joint venture services are collectively counted against the cap, while individual services from large retail financial institutions are each capped separately,” according to NAR’s testimony. “The discrimination in the calculation of fees and points is being felt by consumers, including lower-end buyers, who are seeing reduced choices and added obstacles in their transactions.”

 

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Fannie, Freddie to Cut Mortgage Fees, Slightly

Daily Real Estate News:

Seems like the cost of doing business is going up to the point where people can’t afford doing the business. It’s often hard to find affordable housing. It gets even harder to afford the Lenders high business fees on top of the cost of a home. Well there may be some relief on the horizon as mentioned in the following article.

The Federal Housing Finance Agency is reportedly set to announce that Fannie Mae and Freddie Mac will lower the mortgage fees for some borrowers, but the changes are expected to be very minimal. FHFA, the regulator of the mortgage giant insurers, is expected to change the fees that Fannie and Freddie charge lenders to guarantee mortgages.Some borrowers may only see a small benefit – amounting to less than one-tenth of a percentage point, The New York Times reports.

“For most people taking out a loan, the change will be negligible,” The Wall Street Journal reports. “Some riskier borrowers, who make lower down payments and have lower credit scores, will see slight savings that could translate to hundredths of a percentage point on a mortgage rate.”

To balance out the cost of the fee reduction, Fannie and Freddie are expected to raise fees for other borrowers, like those who purchase investment properties, according to The New York Times.

Some housing advocates say the change in fees don’t go far enough to the bigger reductions they were hoping for. “Hopefully over time we can go further,” says Julia Gordon, senior director of housing and consumer finance for the Center for American Progress. “It is important that this not be the last word” on fees.

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The Home Buyer’s Guide to Preparing for a Mortgage

by Courtney Soinski:

Have you checked your credit and decided that it’s time to buy your first home? Well, it’s no surprise that making a home purchase can be an overwhelming process. Fortunately, there are ways to stay ahead of the game while keeping your stress under control. Before you jump into a new mortgage, let’s learn some preparation techniques to achieve the best possible outcome.

mortgage

1. Check your credit report.

As soon as you apply for a mortgage loan, this is the first thing that lenders will look for. It’s always a good idea to check and monitor your credit score, and keep an eye out for any factors that may be harming your scores. Make sure that your credit report is as accurate as possible, and that no one else is getting access to your credit. Remember, the ultimate goal is to prove your creditworthiness to the lender in order to get the best rates.

2. Correct any inaccurate information in your report.

If you see any inaccurate information on your credit report or if you notice any accounts that you didn’t open or addresses that aren’t yours, dispute it with the credit bureaus. Three of the major credit bureaus are Equifax, Experian, and TransUnion.

3. Research, research, and research!

Buying a home is one of the largest financial decisions you will make, so it’s important that you gather all information and research multiple loans, rates and brokers before making your final decision. If you get to work now and start researching all the options out there, you may even end up with better terms and a better rate.

4. The down payment: bigger is better.

Before you even decide how much to put down on your first house, be sure you’re also being realistic about what you can honestly afford. When setting your budget, keep one crucial thing in mind: the larger the down payment, the better your terms will be. Besides, wouldn’t it be nice to pay less every month that you spend in your new home?

5. Watch out for pre-payment penalties.

Depending on the type of mortgage you get, there may also be pre-payment penalties. Find out whether or not you’ll get penalized for paying your mortgage loan off early before making any sort of commitment.

6. Applying for multiple loans over a long period of time can hurt your credit score.

Every single time you apply for a loan, lenders make an inquiry that will be visible on your credit report. By dragging out loan applications over a month or longer, you can actually end up doing damage to your score, which in turn, can affect the type of rate you get on the mortgage. However, if you apply for a few loans over a series of 2 weeks, that only counts as one inquiry on your report, not multiple.

 

Making a huge purchase like your very first home can be very stressful, so every bit of information helps. Refer to this checklist as you prepare to apply for a mortgage loan. Knowing how to prepare makes all the difference in the world when it comes to getting the best rate.

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