Looking to the Market Bright Spots: Conversations with a few Loan Officers
In preparation for this month’s newsletter and examining how the market is performing, I found myself facing another month of discussing the increasing number of homes for sale due to active sellers and cautious buyers—a trend that was becoming repetitive to write about and for you to read.
Instead, I decided to take a different approach and focus specifically on the market's bright spots: the buyers who are still purchasing homes right now. First things first, let’s address the common misconception that everyone is buying with cash. Local escrow companies consistently report that 25% to 30%, or 3 out of every 10 buyers, each month are cash buyers. This still leaves the majority of the market purchasing homes with a mortgage. So, let’s talk about that group.
With this question in mind, I reached out to a handful of different loan officers and mortgage brokers in the area whom I know and trust. I asked them three simple questions, and here are their answers:
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Question 1: Recognizing the uniqueness of every borrower, what would you say is the closest "silver bullet" approach to helping borrowers afford to buy right now? What is the bridge you are seeing/hearing that helps people span the gap to being able to buy?
Alan Bell, Movement Mortgage
The biggest challenge right now is the purchase price. VA loans, and to a lesser degree, USDA or FHA DPA loans with 0% down options, are helping people get into resale homes. The Renovation loan space is helping my clients find distressed homes that are 80% there but need a little work to be appealing at a lower entry point. And of course, seller credit for temporary buy-downs is still a major inspection period negotiation tactic, but I'm seeing a little less of that seller credit being handed out than in the past.
Hedley Williams/Jake Zeller, Elev8 Mortgage
Temporary buy-downs are the magic touch. Most borrowers are able to save $800+ their first year in the home.
Mark Sue, Canopy Mortgage
Seller credits. I can usually make something work for any buyer if I have credits to play with.
Vanessa Barnett, Loan Depot
The 2/1 buy-down has been a game-changer for the past year or so.
Linda Fisher-Berlanga, Evergreen Home Loans
Payoff of consumer debt with large payments instead of using those funds for a larger down payment; reverse mortgage purchases and, of course, our STEP UP program or a similar cross-collateral program to use equity in their current home to lower what they need to qualify for on a move up, down, or lateral move.
Question 2: What's the number one piece of advice you're sharing with potential buyers right now about how to successfully buy at the moment?
AB:
Be ready to jump on a deal! Let's get initial underwriting done and keep your pre-approval updated with me at all times so we can beat other offers on close time.
HW/JZ:
Get pre-approved before you start shopping. Know your short-term and long-term plans with real estate and plan a strategy around that.
MS:
You need a strong team in your corner. That means a realtor who really knows their stuff and will negotiate on your behalf. And you need a lender who will work hard to optimize every variable for your financial best interest. That can sometimes be the difference between a deal working or not.
VB:
Negotiate! Lower the cost of getting into the house with seller credits. Also, look at the breakeven point when considering interest rate buy-downs.
LF-B:
Don't panic. The right home will come along.
Question 3: Is there anything else, from someone in your position, that you wish everyone knew right now? This would be information different from the usual talking points (e.g., why now is a good time to buy, better leverage to negotiate, missed out on future equity growth, etc.)
AB:
Timing the market is a surefire way to end up spending more money. Home values will continue to climb, and rates will eventually fall. Elections will not determine rates; the data is not there to suggest otherwise. Rep to Rep, Dem to Dem, Rep to Dem, and Dem to Rep have never had a significant effect on rates as an isolated driver. Buy when it aligns with your financial and life goals.
HW/JZ:
I wish everyone knew more about rehab loans. People are looking for the perfect house and paying premiums for them when they could get a house with good bones and finance the remodel costs to get an even more perfect home at a fraction of the price.
VB:
Lenders have a rate sheet, not just one rate to offer. Ask about that and talk through what rate would make the most sense for you.
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Reading through these responses, I hope it is clear there is more than one path to buying right now. If you're having a light bulb moment while reading this, you’re not alone. It's something I see every time I talk to buyers at open houses about these various options. This indicates that the knowledge of these different approaches is not well known or communicated to those outside the industry, except to those actively talking to a lender.
As mentioned in a couple of responses above, the best time to buy is when it’s right for you. If that time is now, let’s discuss how you can use the information above to have a smarter conversation about buying.
