If you are considering making the switch from being a home renter to a homebuyer, that excitement is likely tampered a bit by suffering from the mortgage loan anxiety that comes with it. After all, purchasing a home is a massive financial step that carries with it a whole heap of decisions to make and new responsibilities to shoulder.
But while the process can be daunting, there are ways to quiet your anxiety and ensure you are making the most practical, emotion-free decisions along the way.
Here are a few reasons people suffer from mortgage loan anxiety during the home buying process and how to deal with it.
1. “I’m afraid I can’t trust lenders to get me the best mortgage for my situation.”
The subprime mortgage crisis of 2007/2008 left many potential homebuyers questioning the motives of those issuing loans and everyone else involved in the process. After all, nearly 900,000 people lost their home to foreclosure in 2008 alone, in large part because they were placed in mortgages they shouldn’t have qualified for in the first place.
However, there were a few positive outcomes of the mortgage industry meltdown – like more protections being put in place for consumers. Qualifying for a mortgage is now a more stringent process, which helps to ensure you can afford the monthly payment. In addition, mortgage lenders must follow practices and procedures that protect you, the consumer, instead of being motivated by unfair compensation practices.
While there are more protections in place, the best way to pacify this worry is to do your research. You are in the driver’s seat when it comes to finding the best team to work with and loan to sign for.
2. “I’m afraid my financial situation won’t allow me to get the best loan terms.”
Many people are so afraid of what their full financial picture looks like, they avoid looking until they are in need of loan approval.
The truth is, giving yourself the time to patch up any holes and fix any negative marks before you hand over your financial information to a lender can greatly reduce this nagging worry.
Start by ordering a free credit report from each of the three credit reporting agencies: Experian, TransUnion, and Equifax (you can receive one for free each year). Determine if the information being reported is correct or if anything needs to be fixed, and pinpoint the areas that might raise a red flag to lenders. Gather your pertinent documents and figure out how large of a down payment you can afford.
Once you have a grasp on what lenders might see when they look at your situation, you can make an educated decision about whether you should go ahead with buying a home or wait until your finances improve and you can land better loan terms.
3. “I’m afraid I don’t have enough for a down payment.”
While the rule of thumb has always stayed relatively firm at 20%, there are loan programs available now that could put you into a home for significantly less than this amount.
VA loans can offer 100% financing for active duty and honorably discharged personnel as well as members of the Reserves or National Guard and spouses of military members who were killed in the line of duty. USDA mortgages also offer 100% financing options for low-to-moderate income homebuyers in certain rural areas.
In addition, FHA loans currently require a minimum down payment for as low as 3.5% of the purchase price – a far cry from 20%.
There are plenty of options available for those who haven’t managed to squirrel away a large lump sum. Just be aware, a low down payment could mean you are required to pay for Private Mortgage Insurance (PMI).
“I’m afraid I don’t know how to even get started on the process.”
If you are intimidated by starting the home buying process, remember this: every homeowner has been in your shoes and no one is fully confident right of the bat.
Realtor.com has a simplified list that offers an overview of the steps involved:
- Decide if you’re ready to become a homeowner.
- Get a Realtor.
- Get a mortgage pre-approval.
- Look at homes.
- Choose a home.
- Get funding.
- Make an offer.
- Get insurance.
- Close on your home.
The key here is surrounding yourself with a competent team you can trust. In turn, they will walk you through everything you need to do from start to finish.