As a real estate agent, mortgages are second-nature to you. You understand how they work intuitively, and it’s hard to conceptualize a time when they didn’t make sense.

But for first-time homebuyers, mortgages may seem overly complicated, or they may unknowingly fundamentally misunderstand how mortgages work.

So what can you do, and what should you do to make up for this lack of understanding?

Why you should proactively dispel misunderstandings

So why is it your job to try to improve understanding of mortgages in the first place?

Part of the real estate gig is making sure your homebuyers are getting the right home for them, and part of that means ensuring they’re getting a home they can afford.

Because mortgages can impact a homebuyer’s monthly payments for upward of 30 years, it’s imperative that they understand how this could affect their decision.

Thoroughly understanding the mortgage process will also make your deals close faster. If your client understands that a prequalification isn’t a guarantee of financing, you’ll run into fewer issues with the loan falling through at the last second.

What you can do

What steps can you take to ensure your clients understand mortgages fully and accurately?

  • Point to the right resources: First, you can direct them to the right resources. Online informational resources like and Down Payment Resource can be invaluable in making prospective buyers feel comfortable and confident in the homebuying process. You may also be able to direct your clients to lenders who can give them a thorough rundown of the process.
  • Answer questions: Make your client feel comfortable asking questions, and answer those questions to the best of your ability. If you don’t know the answer offhand, offer to look it up, or direct them to a resource where they can get an answer.
  • Ask questions: Part of the problem here is that clients may overestimate their own knowledge of how mortgages work; in other words, they think they understand, but they don’t. Clients won’t ask questions about things they think they already understand, so it’s a good idea to ask a few questions of your own to gauge how informed your client already is (or isn’t).

Points of confusion

It’s also helpful to understand some of the most common ways new homebuyers misunderstand mortgages and the mortgage process:

  • The full monthly costs of the home: To a new homebuyer, it may seem like the monthly cost of the mortgage is the outright cost of owning a home, but you know better, and you know about those little surprise costs that new homeowners might not realize exist. Make sure your clients understand that the total monthly cost of ownership will include things like insurance, property taxes and ongoing maintenance and repairs. That way, your client can better estimate how much he or she can spend.
  • How prequalification works: To the unacquainted, “prequalification” sounds synonymous with qualification. Once your clients secure prequalification for a mortgage, they may falsely believe that they’re good to go. If your client then opens a new account, quits their job or changes their financial status in some other way, the deal may fall through at the last moment, creating headaches for both sides.
  • Down payment influences: Many new homebuyers don’t fully understand how down payments work — and what they can affect. They may not understand that a larger down payment can minimize their interest rates or spare them from paying PMI. On the other end of the spectrum, they may believe that a bigger down payment is always the better choice and might put all their savings into a down payment, rather than holding some back for expenses, fees and initial repairs and improvements.
  • Rates and fees: Homeowners are also notoriously bad at understanding how rates and fees work. They may not know what fees they’re responsible for and may not understand how fixed rate versus variable rate mortgages work. They may also be unaware that they can negotiate with their lender of choice to reduce those rates and fees to secure a better deal.
  • Terms and conditions: Finally, make sure your clients understand how the terms and conditions of their mortgage are going to work. Do they understand the difference between a 15-year mortgage and 30-year mortgage, beyond its duration? Do they understand the potential savings of bi-weekly payments, rather than monthly payments?

Armed with knowledge and these strategies, you can proactively clear up most homebuyers’ points of confusion or misunderstanding, long before they get trapped in a mortgage they can’t afford or don’t understand.

It will help ensure the homebuying process goes smoothly and guarantee a more comfortable payment process for your clients in the future.

Anna Johansson is a freelance writer, researcher and business consultant specializing in entrepreneurship, technology and social media trends. Follow her on Twitter and LinkedIn.

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