"The Worst Thing About Growing Old" (Creepypasta)
This is the Worst Thing About Getting a Mortgage
Prospective home buyers are confident that they’ll be able to find an affordable mortgage to make their purchase. Still, they’re thoroughly overwhelmed by the amount of information they have to wade through when securing a mortgage. That’s according to a survey by Discover Home Loans, a subsidiary of Discover Financial Services. It found that 87 percent of people planning to buy a home in the next year and a half are pretty sure they’ll be able to get a mortgage they deem affordable. The survey also found that 94 percent of prospective buyers think purchasing a home is a good investment.
But 63% are overwhelmed by the amount of mortgage information available, including anything from what they find online, to offers from lenders, to the stack of paperwork that accompanies any mortgage transaction. An even greater percentage, 76%, of first-time buyers reported feeling overwhelmed
It makes sense that buyers today are confident they’ll be able to get an affordable mortgage — they’re taking a lot longer to educate themselves on the mortgage process before they start shopping, said Cameron Findlay, chief economist of Discover Home Loans. If they weren’t pretty sure they could get a mortgage they’d be able to afford, they probably wouldn’t consider buying to begin with. (Although presumably that doesn’t apply to everyone; 13 percent of those planning to buy a home said they aren’t confident they’ll be able to secure an affordable rate on their mortgage.)
This longer education period (for most) is a change from a decade ago, when people who wanted to buy a home may have felt compelled to jump into the process fairly quickly, before they were priced out of the housing market, Findlay said. But many are still shaky when it comes to understanding their home financing, and have some work to do before fully understanding how a mortgage will fit into their budgets.
Of the 1,037 prospective buyers surveyed, 87 percent know what type of property they can afford, and 83 percent say they’re prequalified for a mortgage. But only 52 percent have determined their projected monthly payment. And only 59 percent have calculated their down payment.
One change is coming next year that could potentially help borrowers gain a clearer understanding of their options: Lenders will be required to use simplified disclosure documents to inform borrowers of mortgage terms, Findlay said. The most helpful part of the new disclosures is that all lenders will be required to use a standardized display of information, which should make comparing loans easier, said Keith Gumbinger, vice president of HSH.com, a provider of consumer loan information.
Here are some tips to make the mortgage process less confusing.
Understand Your Finances
“It’s best to have your financial ducks in a row so there are no surprises,” said TJ Freeborn, mortgage professional with Discover Home Loans. Start by developing a good understanding of your finances. And have a general working knowledge of what your credit score is, said Anthony Hsieh, chief executive of Loan Depot, a mortgage lender. Get prequalified or even preapproved for a mortgage loan before you start house shopping, Freeborn said.
Also think about how long you plan on staying in the home, as well as your tolerance for risk — both of which will help you determine whether to even consider adjustable-rate mortgages, Gumbinger said. By knowing the type of mortgage you want—before even talking with a mortgage banker—you won’t have to sit through pitches that don’t apply to you. “You could lose your mind in conflicting advice,” Gumbinger said, so before talking with someone, know where you stand financially and the type of mortgage that interests you.
Find a Lender You Trust
When choosing a mortgage banker, get recommendations from friends and family, and check the Better Business Bureau for any red flags. The chosen person can be your guide through the process, pointing you to helpful online resources and answering all your questions, Freeborn said.
When deciding who to work with, you also want someone with a reputation for getting purchase deals done on time, Gumbinger said. And while some people may be open to online lenders, first-time home buyers may feel more comfortable with a local lender, someone they could sit across from at a desk, he said.
No Questions Are Too Small or Silly
Don’t be intimidated, and ask the mortgage banker any and all mortgage questions you have. A good one will be more than happy to get you the answers you need to feel comfortable and prepared for the next steps in the process, Freeborn said.
“You have a right to ask questions, and you have a right to expect answers — and answers that you can understand,” Gumbinger said. If you get an explanation you don’t understand, speak up and say so. Don’t sign anything until all the details are clear.
Trust Your Instincts
If something seems too good to be true, it probably is. So when things don’t add up or you can’t get straight answers, step back and reconsider whether you’re working with the right person, Freeborn said.
Understand, however, that application and appraisal fees most likely aren’t refundable, Gumbinger said. So if you’ve already paid these costs, you might be out several hundred dollars if you switch lenders.
Amy Hoak is a MarketWatch editor and columnist based in Chicago. Follow her on Twitter . This article originally appeared on and is reprinted by permission from Marketwatch.com, ©2014 Dow Jones & Co. Inc.
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