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SALT LAKE CITY — The busy spring months have arrived and the housing market is heating up in Salt Lake City. Many home buyers are likely wondering what to expect this season and how they can come out ahead of the crowd. Start by separating the myths from the facts.
As lenders, we want consumers to feel safe and comfortable with their decision to become a homeowner. Over the years, I have discovered five common misconceptions held by those who are new to the home buying process.
You need 20 percent down to buy a home
There are many great loan programs available for people who want to buy a home. Buyers can qualify for a loan with lower down payments such as FHA, VA and state housing programs. Some programs, such as VA loans, offer zero down payments.
Fear of judgment
Some borrowers fear that a lender will judge them when they apply for a mortgage loan. Perhaps this is because they don’t fully understand the qualification process.
In reality, working with a professional mortgage lender can be a smooth and easy process. Loan Originators set clear and realistic expectations so that the process is not confusing. Our goal is to educate borrowers and empower them to make the best decision for their future.
Pre-qualification versus pre-approval
Lenders know the difference between being pre-qualified and being pre-approved for a home loan, but consumers may not. When a homebuyer is pre-qualified, he or she has provided the lender with the basic information to determine which loan program the homebuyer may qualify for. Whereas, when a homebuyer is pre-approved, the lender has collected, verified and presented the information needed for underwriting and approval.
Income determines the loan amount
Many loan applicants believe that their monthly or annual income will determine the amount of money they can borrow to purchase a home. However, debt load is also an important factor. Before choosing a loan, borrowers should stop and consider their target monthly house payment.
It is best to back into a loan and determine what you can afford to pay each month while maintaining your desired quality of life. It is also important to build unforeseen home repairs into the budget. This will help you avoid becoming “house poor.”
Interest rate differentials
There is a lot of confusion when it comes to interest rates. Many different factors determine the interest rate for each buyer. It all comes down to choosing the right loan product. Borrowers should become educated about their options in order to feel empowered to choose the loan that best fits their personal, financial and qualification needs.
Once a consumer knows the best option, they can meet with different lenders to find the best interest rate for that specific loan product. Utah buyers who can qualify for FHA loans have some additional options through Utah Housing and USDA.
One of the most important things a lender can do is to help homebuyers feel empowered and confident. Potential homeowners can better plan for the future by “qualifying themselves” and backing into the home loan process by knowing the impact of a home payment on their finances. It is very important for a buyer to understand their personal budget and how a house payment will affect their financial situation.
Purchasing a home is one of the biggest decisions in life. A mortgage lender should be a partner and a teacher.
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*Dave Zitting is the Present and CEO of Primary Residential Mortgage, Inc. Follow his blog at www.davezitting.com.**
