January 20, 2020
Despite changes in loan fees, interest rates, regulations and laws, and lender’s underwriting guidelines, people are still very interested in owning their own homes. Or in selling their current home and “moving up.” Speaking of which, Orion’s brokers report that move-up buyers are catching a break during this time of year. They’re facing a less frantic housing market than earlier this year. Prices are stable. In some areas more homes are up for sale, so competition is easing. Those shopping for their next property actually can be picky.
Economists say homes are expected to continue appreciating, though at a slower pace, and mortgage rates likely will tick up in 2020 because the U.S. economy is okay and the world economy may improve. There’s uncertainty on the horizon – isn’t there always?
Loan Officers are giving some advice to move-up buyers who are out in the market. The housing mix still favors sellers, though it’s not as lopsided as during the first part of the year, and some homes are receiving no offers. In most areas, dramatic, month-to-month run-up in prices has stopped. And winter sales usually are slower than in the spring or summer. But your clients shouldn’t wait too long: there are predictions that the interest rate on a traditional 30-year, fixed-rate mortgage may increase to 4.50% this year, up from an average of around 4.00 percent now, depending on the program.
Remember when the Dodd-Frank Wall Street Reform and Consumer Protection Act took effect, and with them the QM versus non-QM discussion? There were those that said people would stop borrowing money. They were wrong. Yes, lending rules changed as the industry shifted to QM (“Qualified Mortgages”) loans. And yes, it became tougher for some who had accrued significant debt to obtain a loan.
But our industry continues to thrive, and 2019 was a fine year. The rules prohibit practices common before the financial crisis, such as “no doc” or interest-only loans, and require lenders to verify that prospective borrowers can afford to repay their mortgages. The bulk of Orion’s business is in qualified mortgages, which give lenders greater legal protection and require that borrowers meet stricter rules, such as a 43 percent debt-to-income ratio.
There are many other strategies that move-up buyers are using, and Orion’s brokers are seeing clients pricing their current home to sell fast, considering a lease-back deal, or building their own home. But since the right financing is critical to the process, wise borrowers are consulting with a reputable broker during the process, knowing it will pay off in the short & long run.