Happy Friday the 13th, everyone! During my years here on your planet, I’ve discovered that Friday the 13th is quite a peculiar day that’s viewed and observed many different ways by many different Earthlings.
A lot of individuals see the date as unlucky, a superstition that originates back to the early days of ancient and modern religions. One theory is that it is all a product of “magical thinking,” which is when someone believes there is a causal relationship between two things that are otherwise unrelated. For example, Friday and 13 together take on a different quality when they fall on the same day.
This unlucky feeling drives a lot of individuals to take extra caution on this day, watching out for additional whammies like black cats and ladders awaiting someone to walk beneath them. Of course, the superstition of Friday the 13th also evokes a sense of elation to many, as they run around the woods wearing hockey masks.
Whatever the reasoning or rationale for Friday the 13th being unlucky, I’m not buying it. That’s probably because I’m not a huge proponent of superstitions. The one exception, of course, is wearing the jersey of my favorite Amicitian vlarp racer before any competition. Not doing so could mean certain defeat. My Earthling sports fans know what I’m talking about.
Nevertheless, the bottom line is that Friday the 13th represents irrational fear, fear of the unknown with assumptions being made that aren’t always true. Sounds a lot like potential borrowers not familiar with the mortgage lending process, doesn’t it?
A few years back, I looked at irrational fears associated with attaining a mortgage that we must help our members overcome – I thought today was the perfect time to revisit them.
Before we get to those fears, let’s remember that as you’re working with your members, always keep in mind that they are not mortgage aficionados. In fact, they probably only go through the process a few times in their lives. They don’t necessarily realize many of their fears about mortgages are probably irrational. It’s our job to guide them.
Although this is far from a complete list, following are some of the more common fears exhibited by members that may be preventing them from pursuing a home loan from your credit union:
- Irrational Fear #1: A member’s credit must be nearly perfect. While there’s no doubt that a high credit score could help a member get a better loan, it isn’t a deal-breaker if their score is somewhere in the middle. For example, Fannie Mae’s requirement is 620 for a fixed rate home loan (640 for adjustable rate), so even if a member has some blemishes, if they pay their bills and have a steady income, they probably don’t have much to worry about.
- Irrational Fear #2: A member must have a down payment of at least 20% of the purchase price. According to Fannie Mae, 75% of consumers are not aware of low down payment programs. There are housing programs that allow members to put down as little as 3-5 percent of the sale price. And, if you look at government programs, such as VA, USDA and FHA, low to no down payment is not out of the question. Read more about these government loans in one of my previous posts, The Red, White and Blue Mortgage.
- Irrational Fear #3: A member’s income determines their loan amount. Many members assume that a higher income means they can land a larger mortgage, but this isn’t always the case. Debt is the biggest factor that will affect mortgage qualification. If they’re carrying a lot of extra debt (Fannie Mae caps debt-to-income at 45%), it will cause credit union mortgage lenders to reduce how much they can offer a member for a mortgage.
Irrational fears. Not so scary after all, huh? Of course, there are many common fears concerning home loans – what are some that you’ve helped your members overcome? Please share them so that we can all better assist our members who are being frightened by these irrational fears.
Mortgage qualification research provided by Fannie Mae.