'Best mortgage is no mortgage.' Why does Freedom's Stan Middleman say that?

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In a housing market short on inventory and tall on big down payments, mortgage lenders play a critical strategic role for first-time homebuyers. Lenders can help house hunters understand all their financing options and make the most attractive offer possible on a home.

"In my view, the best mortgage is no mortgage. People should invest in their home, not in their home financing," Freedom Mortgage CEO Stan Middleman said in an interview.

That may sound odd coming from the founder of a mortgage company who just dropped $20 million on a beachfront mansion in South Florida, but it's a philosophy Middleman credits for his success and an approach he thinks more lenders should embrace.

"If it's good for the consumer, it's good for the industry," he said.

The increasingly tight housing market adds further complications for consumers making the biggest purchases of their lives.

It's never easy for consumers to make one of the most important, and expensive, purchases in their lives, especially in a competitive marketplace. That's especially true for first-timers, which account for nearly half of all home purchases. Of them, 61% are millennials, according to Zillow.

The best way for buyers to compete is to fight in their weight class. Perhaps the biggest lesson learned from the housing crisis was the risk of consumers who stretch themselves too far on how much home they can afford.

"I prefer to see people qualify easily. Be a strong buyer. VA loans allow people to finance up to 100% of the loan amount. There's FHA programs that finance 97.5%. There are states and municipalities that have all kinds of assistance programs. But I think the biggest thing I'd recommend is people buy homes they can afford," Middleman said.

Of course, there's no shame for consumers to save money and shop within their means. Median down payments recently hit one of their highest levels ever, according to Attom Data Solutions. Following that trend helps potential buyers lock down a home. The housing crisis stemmed from buyers doing the opposite. With too many people looking for too much help, the quality of credit deteriorated.

"It doesn't hurt you to buy less home than you can afford. Instead of it being 'what could I do,' it should be 'what should I do,'" Middleman said. "I don't think there's enough 'what should I do' decision making. Realtors get paid to sell as much house as they can for the money, lenders don't."

Housing is like any other industry. When inventory's at a premium like it has been lately, it drives up prices. Supply is especially lacking at the bottom end of the market, where most first-time homebuyers target. However, a boost could ultimately be coming, as housing starts are projected to bring relief to the shortage in the approaching months, according to Fannie Mae.

"As everyone responds to the current market conditions, that will drive the price up and encourage homebuilding. I think you have a really healthy ecosystem that is supporting itself, driven by supply and demand. And it looks like we're operating in that zone right now," Middleman said.

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First time home buyers Down payments Housing inventory Freedom Mortgage Zillow Attom Data Solutions Fannie Mae