Six Myths About The Mortgage Industry

It’s graduation season and now, more than ever, there is an increase in the amount of college graduates moving to metropolitan areas. Houston is near the top of the list of cities growing with these young professionals, and this age group is the main force behind the housing marketing in 2015. However, many of this new generation still believe old myths about mortgages, making the home buying process more difficult for them. The following are the six most common myths regarding mortgage lending.

1. A 20% down payment is necessary.
   There are many options available for new homebuyers (or even those who have already gone through this process). There is no need for a large down payment, but keep in mind, the lower the amount offered beforehand, the higher your monthly mortgage payments will be. 
2. It’s hard to find a lender.
   Many homebuyers believe lending requirements are tough. Your financial situation does play a part in the home buying process, but be sure to speak with a reputable lender about low payment options and always remember to get a second – and third – opinion.
3. Buying is always better than renting.
   On average, it takes about 5-7 years to break even with the costs of buying a home in comparison to renting, so be sure the amount of time spent in a home with be at least this long. 
4. The 36% total debt rule.
   Many lenders follow the 36% debt rule – if a potential buyer’s total debt is less than 36% of their total income, they can afford a mortgage payment. Instead of following this rule, track annual spending. Save at least this much toward a down payment to see if a mortgage payment is possible. 
5. There’s no rush, because the rates will stay low.
   There is no one entity that controls mortgage rates. The rates change daily in response to various economic events both nationally and internationally. With the growth of the economy, mortgage rates may rise as well. Don’t be afraid to begin the buying process.
6. A 30-year fixed-rate mortgage is the best choice.
   The 30-year fixed-rate mortgage is the norm, but this doesn’t mean it’s the best choice for every buyer. It depends on how long a buyer plans to live in the home – sometimes this is five years or ten years. If a 30-year mortgage is agreed upon, buyers could loose money from higher interest rates.

As more young professionals move to Houston, the more potential buyers need to know truth from myth. Be sure to know the facts before agreeing to a mortgage that isn’t appropriate for your budget or too lengthy for your lifestyle and career. Lenders know buyers aren’t perfect and will help find mortgages tailored to your needs.

30 Year vs. 15 Year Conundrum

Buying a home is one of the most important financial decisions of your life. Knowing and understanding which home mortgage loan type to choose is critical.

The first step is choosing the right type of loan. Fixed-rate and adjustable-rate mortgages are the most common, but there are also Veteran Affairs, Federal Housing Administration, balloon, interest-only and reverse mortgages. Thus, the best choice will depend on your financial position, the state of the economy and your willingness to take a risk.

There are several questions you should ask yourself when deciding on a loan:

1. How long do you plan to be living in that particular house?
2. Are you willing to take financial risks?
3. Are there restrictions associated with the loan options?
4. Are there any penalties you will incur?

Below is a quick rundown of the mortgage options you will most likely see:

30 Year Fixed Rate Mortgage

1. Helps you purchase a more expensive home that meets the families real needs, and allows you to pay for it over time.
2. Has an increased tax deduction because you’re paying more annual interest.
3. Provides flexibility for families with fluctuating monthly income by allowing them to pay more or less based on their monthly cash-flow.

 15 Year Fixed Rate Mortgage

1. Homeowners are able to pay off their home faster while also earning equity faster, which helps support their overall financial plan.
2. Homeowners will be able to save interest, which adds up significantly over 30 years.
3. A 15 year mortgage allows families to align their mortgage with significant life events such as retirement or a college education.

At Zeus, we offer a customized mortgage term, which allows families to pick their monthly payment first and their term second in order for the mortgage to fit your needs. Also, some homeowners have a fear of refinancing due to not wanting to start a 30-year term all over again. However, with our customizable terms, you can have a lower interest rate and a lower monthly payment. For example, a family who has already paid their 30-year mortgage for four years can simply use out automized mortgage to refinance for 26 years while lowering their monthly payment and/or interest rate.