And Now, a Few Words from the Wise (Lenders)
I know all of us have been on a bit of a roller coaster wondering about the economy, rates, and what this all means for the housing market.
For this month, I decided to go to lenders I love to work with and ask them their thoughts on the market. So here in no particular order are my mortgage broker friends and colleagues:
Brady Thomas, La Salle Financial
- The only way our housing market was going to 'cool' was with higher rates. We now have that. For some, this can be a real opportunity. Those that could not compete against all-cash buyers and multiple bid situations have a real shot to buy now.
- Buyers need to be talking to their agents about using seller concessions to buy down their rate, get closing costs covered, or reduce the price.
- I am telling buyers to make sure they can answer two questions in the affirmative:
- Can you 'stomach' the monthly payments on this mortgage?
- Do you love this house and see yourself being there for 5-10 years?
Don't count on being able to refinance immediately, so being comfortable with the payment is crucial. And don't plan on being able to sell for a profit in 1-2 years, so make sure it is a home you can stay in for 5+ years if the market requires it.
Dominick Villa, Summit Funding
A general note of advice: The expression “marry the house, date the rate” gets thrown around a lot. However, with rates as high as they have been, it definitely feels like a bit of an abusive relationship to be dating a rate. So, any step that is put in place now to acquire a home should focus holistically on long-term goals to make sure the timing is right; but also with a second step for consolidating that mortgage as soon as possible. That way you can instead marry the great price you get right now to an even better payment when rates go down, and that’s the marriage we are looking for to be healthy and happy for a while.
Risha Kilaru, Origin Point (a COMPASS-affiliated Business)
I can sense that the housing market is already turning for the better. Savvy buyers have figured out they are better off with a lower home price versus a lower interest rate as rates can always be refinanced. They are taking advantage of creative financing like ARM loans and seller-paid buydowns that help lower rates for the first two years, with a view that current rates are transitory. Recent US data showed some encouraging signs on inflation, and stocks are also up as company earnings came in better than expected — all great signs for housing. Remember, you “marry the house, but date the rate.”
A 30-year, fixed-rate mortgage is not the only option. Lenders offer a variety of mortgage products tailored to your specific economic conditions and budget. Beyond the basics of a fixed or adjustable loan, lenders also have programs such as paying points, permanent & temporary buydowns, and short-term and interest-only options to make your loan payments more manageable. Again, it’s essential to consider how long you’ll stay in the house, which helps you determine your break-even point and which product is best.
There you have it — four of my favorite lenders all offering ways to weather this financing storm. It will get better: Buyers always have to buy, and sellers always have to sell.