Debunking Mortgage Myths after the NAR Settlement Changes 

Buying a home is an exciting time, but it can also be overwhelming, especially with all the information and rumors circulating. The recent NAR settlement has sparked some confusion and misinformation for homebuyers around the mortgage process.

In this blog, let's address and debunk some common myths related to the recent National Association of Realtors (NAR) settlement and how it affects your mortgage options.

Understanding the NAR Settlement

The National Association of Realtors (NAR) recently reached a settlement in a long-standing antitrust lawsuit.  This agreement aims to address concerns about how real estate commissions are structured and disclosed.

Homebuyers will now sign a written agreement with their agent before touring homes. This document clarifies the services provided, compensation structure (flat fee, percentage, etc.), and their rights. The settlement also encourages negotiation on agent fees.

As with any significant change, misunderstandings can arise. The NAR settlement has led to confusion about its impact on the mortgage process for homebuyers.

Common Myths

Myth 1: The NAR Settlement Changes Your Access to Mortgages
Fact: This is simply not true! Your ability to secure a mortgage for your home purchase remains unchanged. You'll still have the freedom to choose who pays the buyer agent commission, whether it be the seller, listing broker, or yourself. Here at [Your Company Name], we continue to lend as we always have, ensuring a smooth home buying process.

Myth 2: You Can Finance Real Estate Commissions with Your Mortgage
Fact: Busted! While the NAR settlement brings more transparency to agent fees, financing them through your mortgage isn't currently allowed. Here's why:

• Loan Limit Rules: Institutions like Fannie Mae and Freddie Mac set limits on how much you can borrow for a mortgage. These limits don't include real estate agent fees. Adding the commission to the loan amount could push you over the limit and disqualify you for the mortgage.
• Impact on Eligibility: Even if you stay within the loan limit, a higher loan amount often means a higher monthly payment, affecting your debt-to-income ratio, a key factor in determining mortgage eligibility.

Myth 3: Your Loan Type Dictates Your Buyer Broker Commission Cost
Fact: It's a common misconception that the type of loan you choose can restrict the amount you pay in real estate commissions. We do not consider buyer agent commissions as "interested party contributions," meaning these commissions are separate from your loan terms, allowing you to negotiate the best commission rate for your situation.

Myth 4: You Must Get Pre-Approved Before Signing a Buyer-Broker Agreement
Fact: This isn't true! While it's beneficial to have a pre-approval in hand when house hunting, it's not a requirement before signing a buyer-broker agreement. However, it's crucial to inform your loan officer about the agreement you have made for the buyer-broker commissions to ensure an accurate assessment of your financial situation and avoid potential surprises during the home buying process.

While the settlement aims to increase transparency, it’s important to understand that it doesn’t fundamentally change the way real estate transactions work. Remember, while some practices may have changed, core benefits remain. Mortgage Lenders and REALTOR® agents are bound by a strict ethical code, promoting transparency in communication, and ensuring they work in your best interest. Be sure to ask questions and understand the services offered before signing an agreement. This knowledge will empower you to make informed decisions for your homebuying journey.