These days, most consumers go online to the search engines as they start the process of purchasing a good or service, and applying for a home loan is no different. In fact, each month, about 4 million U.S. homeowners and loan shoppers go to Google for answers to their top mortgage questions.
While Google isn’t the only search engine in town (or on the Internet), the Mountain View, California company that was founded in 1988 dominates the lion’s share of Internet searches. In fact, Google accounts for 68.5% of all online searches in the U.S., with Microsoft sites (18.6%) and Yahoo sites (10.1%) the closest competitors.
So we decided to research the top 10 questions about mortgages that were Googled every day (other than questions like, “How can I find the cheapest interest rate?” and “What do I do if I can’t pay my mortgage?)
Here are the results of the top 10 Googled questions about mortgages – with our comprehensive answers!
Google query #1: “How much house can I afford?”
The amount of mortgage loan – and therefore the price tag on the home you buy – has more to do than just how much of a payment you feel comfortable affording. In fact, underwriters at any bank will collect documentation on your current monthly payments from credit cards, student loans, installment loans, car loans, child support payments, and any other potential future mortgages.
They’ll use this information to calculate your Debt-to-Income Ratio, which is the percentage comparison of a borrower’s monthly net income versus total payments. There is no hard and fast rule for what Debt-to-Income (DTI) ratio will be approved, as each bank, program, loan product, and compensating factors come into play, but in general, a DTI of 36% or so is considered favorable.
Google query #2: “Should I refinance my mortgage?”
A recent report published by the Washington Post documented that 20 percent of American households with mortgages – about one million of them – are eligible and would benefit from refinancing in today’s low rate environment, but have failed to do so. The failure of homeowners to take advantage of a potential savings via refinancing – an estimated $45,000 average savings over the life of each loan – is something that’s leaving economists scratching their heads.
Right now, we find ourselves in rare economic times, with interest rates still near all-time lows, jobs and income numbers on the rise, and equity in our homes recovered through the last five years to pre-recession 2007 levels. But rates are almost certain to rise as the Fed raises rates in future meetings, so at the very least, talk to your mortgage professional about a potential refinance.
Google query #3: “Are interest rates going up or down?”
No one has a crystal ball where they can 100% know what’s going to happen to interest rates in the future, but we can look at historical trends and economic factors to make a reasonable assessment. And that is…drum roll please…that interest rates will rise in the next 18 months. Since 2008, we’ve benefited from a historically low 0-0.25 percent fed funds rate to stimulate the economy. But now, with optimistic jobs numbers and a healthy real estate market, the fed is expected to start a gradual rate increase over the next year to achieve normalized levels and temper inflation.
Google query #4: “Should I get a fixed-rate or adjustable-rate mortgage?”
There is no one right “best” loan for everyone, as each borrower’s circumstances and needs may be different. When interest rates are low and continued to rise (like today), locking in a fixed rate loan for 30 or even 15 years is probably a wise idea. But if borrowers know that they’ll be moving within a few years or more, their financial circumstances will change (better job, increased credit score, etc.) or they just want to get some payment savings in short-term to buffer against future interest rate increases, an adjustable loan product may be a viable option. Consult your mortgage lender for a detailed analysis of what loan products you qualify for and the benefits of each, but if in doubt, lock in a low-interest 30-year loan these days.
Google query #5: “Are the rates I see online real?”
How about real-ish? Sometimes? Real for some? Probably not? There are a host of answers, but the simple fact remains that rates that you see floating around online or in advertisements are by no means guaranteed. That’s because the bank or mortgage company advertising them is going off the best possible case scenario for a borrower with perfect financials, on a limited basis and sometimes only after paying points.
No one can guarantee you an interest rate until you’ve submitted all of your documentation and an application to the bank and been locked and approved. Don’t fall for the bait-and-switch via the Internet like so many borrowers, wasting their time, money – and sometimes losing them the great deal they could qualify for.
You can see the rest of the top-10 Googled questions about mortgages in part two if this blog.
Even better than relying on Google, contact Jeff Compton at Guild Mortgage if you have any questions about getting a mortgage or refinancing!