When making a decision as big as taking out a mortgage to purchase a home, you need to remember one thing…knowledge is power.

With so much misinformation out there, it’s easy to get lost when navigating an unfamiliar process such as home buying.  Don’t get caught up believing every story you hear or click-baiting headline you read. When you (and the mortgage professionals behind you) have a firm grasp on whats going on in the industry, you are empowered to make the decisions you are most comfortable with and have the best possible experience. To start you off, let’s debunk the top five myths about mortgages that we always see floating around…

Down Payments

Myth:

You can’t buy a home with less than 20% down.

Fact:

Although it’s always a good idea to put down as much as you are financially comfortable with because it reduces your monthly payment, there are several loan programs with down payments under 20%. For example, there are options that give buyers the ability to put 10%, 5%, 3.5% and even 0% down. Two of the most popular low downpayment options are VA Loans backed by the Veterans Administration and FHA Loans insured by the Federal Housing Administration. Ask your mortgage loan officer about all your downpayment options and decide what you are most comfortable with.

Fixed Rate Vs. Adjustable Rate

Myth:

Fixed rate mortgages are always better than adjustable-rate mortgages.

Fact:

After the 2008 financial crisis, people became wary of anything other than a 30 year fixed rate because the market was so unstable and fixed rates never change throughout the life of the loan. However, in a nutshell, fixed-rate mortgages are really only the better option if you are planning to stay in the home long term. Adjustable rate mortgages offer the benefit of a lower rate for a certain number of years. If you know you’ll only be in a house or area for a short-time, then this will definitely save you money on your monthly payment.  Our Mortgage Payment Calculators are a good way to play around with rates and what that would mean for your monthly payment – try them here.

Credit Score

Myth:

Your best credit score is used.

Fact:

Mortgage lenders actually will pull three credit scores from each of the main credit bureaus (Equifax, TransUnion, and Experian) and will use the middle of the three scores for your loan application. If there is more than one borrower on the loan, the lowest middle score between the two borrowers will be used. On very rare occasions (mostly with Jumbo loan products), lenders will make an exception and use the higher of the two middle scores if it represents the buyer with a majority of the income. As in all situations during the mortgage process, ask as many questions as you need to and inquire what the best plan of action would be if there is a credit disparity. Southern Trust Mortgage has a resident credit expert that is available to all our Loan Officers and their buyers for these types of scenarios.

Bankruptcy

Myth:

You can never buy a home after filing for bankruptcy.

Fact:

Wrong. Though it may take time to rebuild your credit and prove your ability to repay, you can absolutely still buy a home after bankruptcy or any other derogatory credit event. The main thing you have to do is wait. Waiting periods depend on both the type of credit event you’ve experienced and the loan program you are interested in. The table below is a helpful guide. Click on it to download.

Interest Rates

Myth:

The interest rate you are quoted when getting pre-approved is guaranteed.

Fact:

The only rate that is guaranteed is the rate you actually “lock in”, and unfortunately you can only lock in a rate once you’ve found a property. Rates are tied to daily trading so they can change several times within 24 hours! In most cases, rates hold steady while people shop for homes and there is little difference in what they are quoted and what they end up with, but this isn’t always the case. It’s very normal to be concerned about the volatility of the market after getting quoted, that’s why Southern Trust Mortgage loan officers keep all borrowers updated on patterns and offer advice throughout the entire home loan process.

Shopping “local” has been all the rage in recent years…but why stop at clothes and groceries? Did you know that using a local lender for your mortgage can actually help you stand out in today’s increasingly competitive housing market? Here’s how…

Knowledge of the Local Market & Local Relationships

Loan Officers who work for local lenders have a great knowledge of that particular market and know what it takes to get deals done in that area. They are privy to market conditions and local real estate trends. Because of this, the “local mortgage broker” model is essentially referral-based. Real Estate Agents build relationships with local lenders that have a proven track record in the location they serve, so they can have peace of mind knowing their deals will close smoothly. Much the same, sellers like to see offers attached to local companies because they can move forward confidently knowing these lenders have proven track records of stable real estate relationships and closing success.

Accessibility

Even in 2018, there’s no technology out there that can replace the comfort and transparency of a face-to-face relationship with a mortgage loan officer. When it comes to the often complex and intimidating home loan process, both you and your agent will want someone who’s just a quick phone call or car ride away. Big banks get hundreds of loan applications a day and cannot possibly keep up with the personalized customer service that small lenders are able to offer. Sellers’ are well aware that certain “hurdles” or “hiccups” can occur during the mortgage approval process, and they are more apt to accept a bid from someone working with a lender that is readily available for questions and problem-solving so there is no delay in closing.

Speed

When the real estate market is hot, homebuyers looking to be competitive cannot be on “bankers’ hours”. Any seller will tell you that the offers that stand out are the ones that can close the quickest. Because they are generally more likely to have “mobile” hours and underwriting in-house, local lenders can almost always offer the advantage of speed. Therefore, mortgage brokers with small companies are much less likely to be tied to a 30-45 day closing window. In fact, at Southern Trust Mortgage, we are able to offer a fully underwritten credit approval in 24 hours or less through our Priority Approval program. Getting approval that quickly means both homebuyers and their agents can write strong offers with the confidence of a fully- approved borrower. These offers definitely have an advantage over the rest because they usually have the ability to close as many as two weeks early!

Price

Being able to scroll through numerous rates online may seem like the easiest way to pick a lender, but it’s definitely not your safest bet. Large companies that advertise their rates on the internet usually have hidden costs built in elsewhere so that they can show the lowest rate possible. This can mean that the hundreds of dollars you believe you’re saving with a lower rate, is just being spent elsewhere during the process. Additionally, local mortgage professionals are well aware of what they are up against. They know the rates that you see splashed all over websites, so they are prepared to fight to get you the lowest rate possible. They are also knowledgeable about the various loan products available and can place you in the best financial scenario for your unique situation. When you know you are shopping for a home with the most solid rate available to you, it opens up doors (pun intended) to making offers you may not have felt comfortable with had you been handed a “strings-attached” rate from a big corporate lender.

When it comes to purchasing a home in a tight housing market, a bigger mortgage lender is not always better.  There’s nothing better than being able to shop for a home knowing you aren’t just another loan number in their pipeline. Local lenders live off your future business and the referrals they receive. Therefore, they do everything in their power to team up with your agent and equip you with the tools necessary to get you into the home of your dreams…even when there are several other offers on the table.

As a proud local lender ourselves, Southern Trust Mortgage Loan Officers are always standing by to chat with you about your options and answer any questions you have. Give us a call anytime to begin the process of homeownership!