Dissecting and Debunking Today’s Mortgage Myths with Marty Guy Fink

Marty Guy Fink, Homespire’s Virginia Beach Branch Manager, spoke with Hampton Roads Realtor® in their September issue to discuss common mortgage myths and tips that could help Realtors® and buyers alike in today’s challenging market.

Many buyers may have a general understanding of the mortgage process, whether from online research, friends or family, or even just through the media they consume. While these resources can sometimes be helpful, they can also be full of exaggerations or even outright myths. Either innocent or purposely designed to mislead or shock, it can be hard for buyers to separate truth from fiction.

Here is some myth busting 101 that will help both homebuyers and sellers:

The federal rate hike will make mortgage rates go up immediately
This is not necessarily true. Rate hikes have the largest impact on short-term credit like credit cards, home equity lines, car loans and adjustable rate mortgages. With the recent increase, fixed mortgage rates actually dipped a little. Mortgage rates are related to the 10-year bond and mortgage backed securities, so following these can give good insights on where rates may go. The most important thing is to focus on what the buyer can afford rather than the rates.

A VA loan is the worst when it comes to low appraisals
Many borrowers and sellers may not realize VA loans are the only loans that allow the appraiser to notify the lender that an appraisal is coming in under value. Known as initiating “The Tidewater*,” this occurs when the appraiser requires additional information to support the sales or contract price. This allows interested parties more time to assist in providing further data that may not be available to the VA-approved appraiser within a 48 hour deadline.

(*Tidewater Process: If the appraiser expects the appraisal report to reflect a valuation that is less than the sales price, the appraiser is required to notify the requester and allow 48 hours for the real estate agent, lender and Veteran to supply evidence-based data to support the sales contract price. STATEMENT OF JOHN E. BELL III ACTING EXECUTIVE DIRECTOR – LOAN GUARANTY SERVICE VETERANS BENEFITS ADMINISTRATION DEPARTMENT OF VETERANS AFFAIRS BEFORE THE HOUSE COMMITTEE ON VETERANS’ AFFAIRS SUBCOMMITTEE ON ECONOMIC OPPORTUNITY December 8, 2021.)

Buyers must have a 20% down payment
While making a 20% down payment is ideal to avoid paying private mortgage insurance (PMI), lowering payments, and creating instant equity, it is not necessary for many. First-time homebuyers can put down as little as 3%, and if they qualify for a VA, USDA loan or Virginia Housing Loan, they can even choose to put down 0%. In truth, buyers have many options for their down payment and even down payment assistance, too.

Buyers must be employed in the same job/position for at least two years
While buyers must show continuous employment for the past two years, it only needs to be in the same field rather than a specific job. Additionally, some loans will even allow gaps if they have been full time, salaried for two years, and in some cases, school can be used to qualify them in the absence of employment.

Borrowers with a substantial amount of student loan debt will not be able to qualify
Student loan debt is a reality for many of today’s borrowers. If the loans are in good standing with on time payments, they should not be a problem. Lenders consider a borrower’s full financial profile when deciding a loan approval, and student debt is just a piece of it. Loans programs calculate a payment for student loan debt and some of these have a more favorable calculation for a buyer’s payments, and in some cases, income based repayment plans may also be available.

The lower the interest rate, the better
It is tempting to steer buyers towards the lowest interest rate, but this may not be the best option in every situation. Each homebuyer is different, and there are costs that can come with a significantly lower rate. Some of these may be represented as origination points on the loan estimate, and loan officers (LO) should look for things like extremely high closing costs to help protect their clients. It might make more sense for a borrower to put that money towards their down payment or even place it in their savings to help offset the cost of purchasing their new home.

Bottomline – if a loan option or product seems too good to be true, it most likely is. While there is useful information available for buyers doing their own research, they must also realize not everything they find will be correct, or even right for their situation. As industry experts and trusted partners, loan officers are here to help educate and assist with any difficult or confusing lending guidelines. From rates to rules, they can help answer any mortgage questions!

Check out the full issue here.