Whether you’re looking for a mortgage because you’re buying a new home or refinancing an existing loan because of today’s ultra-low rates, it’s important to be on the lookout for potential scams. This is true for all borrowers, especially those who are facing economic hardships.

In fact, COVID-19 has led to many financial struggles for homeowners across the nation. A recent study conducted by OnePoll in conjunction with the National Association of Realtors discovered that the pandemic has caused unexpected financial distress to about 8 out of 10 homeowners.

Because scamming activity often increases during times like these, it’s important for borrowers to remain cautious. Here are some of the warning signs of scams and unfavorable loan terms:

Warning Signs

  • Sounds too easy: Watch out for loans with “guaranteed approval” or “no income verification” regardless of a borrower’s current employment, credit history and assets. Any loan that doesn’t take into account your credit history or ability to repay may be suspect. As a general rule, your mortgage payment should be no more than 28% of your gross monthly income.
  • Large future costs: A high-risk adjustable rate mortgage with a payment that rises significantly after the “teaser rate” period is unlikely to make sense in today’s low-rate environment. Also watch out for balloon loans that require a large sum at the end of the loan term.
  • Barriers to refinancing: Pre-payment penalties are problematic because they make it hard for a borrower to refinance and pay off a high-cost loan with a low-cost one. As you shop for mortgages, look for options that have no pre-payment penalties.
  • No down payment loans: Be careful of loans split into two mortgages, with one having a much higher cost. Homebuyers should be sure they can afford the payments.
  • Unethical document management: Ethical lenders and brokers will never ask you to sign a blank document or one dated before you sign.

Mortgage Shopping Tips

Shopping for a mortgage will help you obtain the best rates and terms. Start by contacting several lenders to make sure you’re getting the best price. The Federal Trade Commission recommends getting information about rates, points and fees from several lenders and comparing each.

Here are some additional questions to ask about each loan:

  • Is the interest rate fixed or adjustable?
  • What is the mortgage’s APR? This includes the interest and loan fees expressed as a yearly rate.
  • What are the down payment requirements?
  • Is there mortgage insurance on the loan and what is the cost?

The FTC also offers a Mortgage Shopping Worksheet that will help you compare loan costs from one lender to another so you can negotiate the best terms. Find this resource and others at consumer.ftc.gov under the “Homes & Mortgages” tab.

Even if you have credit problems, the FTC encourages you to “shop, compare and negotiate.” The FTC also recommends that you check your credit report for accuracy before applying for a loan. Visit www.annualcreditreport.com for a free copy of your credit report.

Tips if You Can’t Pay Your Mortgage

If you are a homeowner who is struggling to meet your loan obligations, work with housing experts and your lender to find a solution. Don’t wait until you fall behind to seek help. Acting quickly may help you keep your home and the money you have already invested into it.

The National Association of Realtors has created a brochure with tips and resources for what to do if you can’t pay your mortgage. Visit HomeownershipMatters.realtor and search for “Having Trouble Paying Your Mortgage.”

If your current lender isn’t willing or in a position to help, you may be able to refinance your current mortgage with another lender. Talk to your Realtor to see if they can help you find responsible lenders that offer fair and affordable loans. Visit MyRealtorStory.com to find a directory of Utah Realtors.

 

Study: Salt Lake is most popular metro for Gen Z

Even while millennials are working on purchasing their first homes, buyers from Generation Z — whose oldest members turn 24 this year — are bringing more competition to the local housing market.

In fact, Salt Lake City has the largest presence of buyers from Gen Z (those born after 1996). With about 8.5% of mortgage purchase requests coming from 18- to 23-year-olds, that’s the highest share in the country, according to a new LendingTree study that analyzed Gen Z buyers in the nation’s 50 largest metro areas.

In Salt Lake City, where the population tends to skew younger, the average age of a Gen Z homebuyer was 21.5. LendingTree said these buyers requested an average loan amount of $244,365 with an average down payment of $32,961.

“Gen Z buyers are young, but that’s not stopping some from getting into or trying to get into the housing market,” said Danielle Hale, chief economist of Realtor.com, in an article referencing the LendingTree report. “Areas where Gen Z buyers are finding success are generally affordable, which makes sense since younger buyers tend to have a harder time scraping together a down payment and also tend to have lower incomes.”

While Salt Lake City housing prices have grown in recent years, the metro is more affordable than many of the other metros in the region such as Denver, Los Angeles and San Francisco where loan amounts for Gen Z averaged $288,832, $392,572 and $575,723.

Even in Utah, however, Gen Z, faces tough competition in local housing markets where entry-level housing is particularly hard to come by. In Utah, the number of homes for sale under $300,000 is about half of what was available last year. The same is true in the $300,000-to-$500,000 range where housing inventory has also been cut in half, according to the Utah Association of Realtors.

With less than two months of inventory, first-time buyers should expect intense competition since there aren’t enough houses to go around.

If you are a Gen Z buyer, here are some tips for finding success in today’s housing market:

Find the right mortgage partner

Even though home prices are rising, low mortgage rates are a huge benefit right now. This week, Freddie Mac reported that the 30-year fixed-rate mortgage averaged 2.8%. That’s the lowest rate in the survey’s history, which dates back to 1971.

To get the best rate, make sure to shop around so you can compare pricing. LendingTree recommends getting quotes from at least three to five different lenders and checking your credit report to make sure there are no errors. LendingTree also suggests looking into first-time buyer programs that can help if you have a small down payment.

Finally, you’ll want to get pre-approved for a mortgage so you can show the seller that you’re a serious buyer who is likely to make it to closing.

Be ready to act quickly

Gone are the times of taking several days to decide whether to purchase a home. If a house you like comes on the market, you’ll want to schedule a showing immediately. If you want to buy the home, you’ll have to submit an offer right away.

Also leave room in your budget for making an offer over the asking price. In today’s market, many homes are being sold for thousands more than the list price as competition drives up values.

Make sure to talk to your Realtor about trends in your local market regarding how fast homes are selling and for how much. Your Realtor will also alert you when new properties are put up for sale so you can act quickly.

Make your offer competitive

While sellers often prefer all-cash offers, that’s probably not possible for most Gen Z buyers. But there are ways to make your offer more appealing. Some of these include having a short timeframe for conducting inspections, finalizing financing quickly and offering a sizable amount of earnest money.

Your Realtor can tell you more about what terms are customary and working well in your neighborhood and price range.

Buying an entry-level home is challenging in today’s low-inventory market. Make sure to work with a Realtor who can help you navigate the current environment. Find a Utah Realtor at MyRealtorStory.com.