While low inventory is certainly challenging buyers, not having a clear understanding of mortgage financing is also causing issues. By having good information, buyers can make better decisions and compete more favorably.
Most buyers don’t realize how the mortgage rate is determined for a borrower. While annual income is important, a good credit score, low debt-to-income ratio, loan-to-value ratio and ability to repay the loan are vital concerns.
A variety of myths seem to permeate the market such as that rates are set and released on a predictable schedule; FHA loans are for first-time buyers only; pre-qualification commits the lender to making the loan at a certain rate; lender fees are not negotiable and adjustable rate mortgages always go up.
Misunderstanding of actual mortgage practices may be a contributing factor for some buyers not taking advantage of what are still historically low mortgage rates.
While getting solid information about mortgages and being pre-approved from a lender early in the house-hunting process are very important, it is only one step in the home buying process. Success in buying a home in today’s market should begin with a real estate professional who will coordinate all the different parts of the transaction including mortgage, contract negotiations, inspections, insurance, and closing the purchase and title transfer.