Don't Celebrate Mortgage When You Don't Know What You're Doing
NEW YORK ( TheStreet) -- You can't blame a first-time homebuyer for being giddy about landing that mortgage turning them from a renter to an owner.
But once the excitement subsides and the champagne wears off, new mortgage holders are left with the realities of the process, which can be overwhelming. It gets even worse for mortgage applicants before a loan is approved, many of whom are unprepared to strike the best deal possible -- if they can get one at all.
A study from Discover Home Loans shows that while 87% of mortgage applicants believe they will ultimately get a home loan, 63% say they are overwhelmed by the amount of mortgage information available.
Some additional takeaways from the study show Americans can get in over their heads quickly during the mortgage process. While the vast majority of mortgage shoppers believe they have a good grasp on the type of home they can afford:
- 41% haven't even calculated a down payment.
- 48% say they "don't know how much their mortgage payment would be if they chose a more or less expensive property."
- The younger you are, the mortgage confused you are, as 76% of mortgage applicants under 30 say they are "overwhelmed."
- 76% of first-time buyers reported feeling overwhelmed, but only 54% of those who have previously owned.
The rule is to know what you can afford before you apply for a mortgage, and know what lenders want before applying.
"The industry is becoming more transparent in an effort to help homebuyers become informed about changes that may affect their process," says Cameron Findlay, chief economist at Discover Home Loans. "The sheer amount of information can lead to confusion and stress. Those looking to purchase should work closely with their lender and Realtor to make sure they are comfortable with mortgage terms and understand the impact a loan will have on their finances."
Discover advises also talking to family and friends who have gone through the process. Do that before sitting down with a mortgage banker, but even then be prepared to ask about affordability issues and cover items such as interest rates, fees and closing costs.
It's also a good idea to talk to a financial adviser, who can help lay out a budget for your new home and balance it with needs such as college savings, student loan payments, child care costs and retirement savings.
Getting that first mortgage is indeed a rite of passage, and a great reason to pop some corks and celebrate with friends and family. But make sure it's the right mortgage.