There's typically a lot that these first time buyers don't know about the home buying process, but that's ok. We normally sit down together for a one-on-one Homebuyer Education Meeting before they make an offer on their home to make sure that they know the important things that will make that purchase go more smoothly.
Many times, though, these buyers come into our Homebuyer Education Meeting with some inaccurate information in their heads, information that they typically found online. Here are two common ways that the internet often lies to the first-time homebuyer...
Misleading Mortgage CalculatorsDid you know that the term 'mortgage calculator' is the most commonly searched term involving the word mortgage? It is...by a landslide. First time homebuyers understandably want to know how much a home is going to cost them each month so they hop online looking for that answer.
While a first time buyer can easily find a mortgage calculator online and get that payment estimate, it's likely that the estimate will be missing some pieces. A mortgage payment typically includes an escrow piece that collects extra money each month and then sets it aside in a savings account for the annual home insurance bill and the property taxes. Online calculators often don't include that part. If they do, they typically make inaccurate assumptions on what the cost for insurance and taxes will be.
The calculators also typically exclude the monthly mortgage insurance. Mortgage insurance is typically charged each month as part of the payment if a buyer isn't putting 20% or more down on the purchase. This piece can add up to 15% of the monthly payment, depending on the loan type, so leaving it out can significantly misquote the payment amount.
Inaccurate Sales DataThe internet is full of housing information these days and many first time homebuyers think it's all accurate. Bad news guys - It's not. Most of the sales data found online is outdated at best. If a first time buyer uses it to gauge how much a home costs in their desired neighborhood or to decide if a home they like is a good deal, they're setting themselves up for disappointment again. That information is not reliable.
Reliable information comes from a licensed Realtor. Realtors (and ONLY Realtors) have access to the Multiple Listing Service (MLS) which houses all of the historic and recent real estate sales data. A Realtor can quickly and easily let the first time homebuyer know what things are really selling for in the area they like and can help them make an informed decision on the fair price to pay for that first home.
Bottom Line - Talk To The ProfessionalsPlease don't get me wrong. I love the internet. The wide array of information found online can definitely benefit a first time homebuyer who is eager to learn. When it comes to the details of the mortgage financing or the values of targeted homes, though, buyers need to get with the experts. Find a lender you trust, find a Realtor you trust, then talk to them about your payment and location goals to get quality, accurate information. You'll be glad you did.
Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office. One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University. You can connect with Lori Hiscock or apply online here.