This week’s Q&A column is sponsored and written by Brian Bonnet, Senior Loan Officer (NMLS ID# 224811) of Atlantic Coast Mortgage, LLC (NMLS ID# 643114). To learn more about current mortgage rates and the home loan process, contact Brian at 703.766.6702 or email [email protected]. You may also submit your questions to McEnearney Associates via email for response in future columns.
Question: Where can buyers find financing help in this market?
Answer: Even if you’ve previously bought a home, you’re experiencing market dynamics that haven’t been in play for decades. Here’s how to navigate the current market atmosphere.
It’s not a new story that it’s tough out there for buyers, but that’s not the whole story. For buyers ready to get to work with their Realtor and their lender, success could be a few smart moves away.
To thrive in a tight and expensive housing market, your Realtor is your expert and guide in the field — there to research property history, study future trends, and learn from other agents in the market. Your lender is there to ensure you have the financing necessary to get the property you want, to avoid taking on more debt than is prudent, and to find creative solutions and avoid last-minute surprises as a loan makes its way through the underwriting process.
Agents and lenders can work together to better prepare to negotiate for their clients, so consumers should prepare to work smarter in this market as well.
While the market is always evolving, there are three angles to help you succeed in any market.
Tap Into Familial Funds
The current housing market is making life especially difficult for first-time buyers, as they don’t have equity from a recent home sale to transfer to their next purchase. Saving for a down payment can take years, but cash provided as gift funds can speed up that process. That’s the good news for cash-strapped buyers: many mortgages allow family members to provide cash to help buy that first home.
Family members can offer support with a down payment, closing costs, or both, but this type of financial assistance needs to be carefully documented as gift funds,
Younger buyers are currently making the most parental ATM withdrawals, with 78% of Generation Z homeowners reporting some financial support for a down payment, mostly from their parents. 54% of Millennials have received assistance, followed by 33% of Gen Xers.
What About Adjustable-Rate Mortgages?
ARMs may not be the solution to high fixed rates.
There is a fair amount of discussion about adjustable-rate mortgages (ARMs) being a decent alternative to fixed-rate mortgages which are currently pushing 8 percent. The truth is that most adjustable-rate programs do not have rates significantly lower than fixed-rate products.
The most recent daily survey of 5-year ARMs pegged the rate at 7.300% compared to 7.900% for fixed-rate programs. Occasionally, a depository institution will offer more attractive ARM rates than the general marketplace for a short period of time to boost its loan servicing portfolio to a desired level. The lower rates are generally short-lived and not widely available to consumers.
The overwhelming majority of purchase money loans being closed are still fixed-rate mortgages and as long as the 10YR-2YR Treasury yield curve is inverted, this will likely continue to be the case.
The Banking Industry Is Trying To Help
Home buyers aren’t the only ones unhappy with current mortgage interest rates. Last week, The Independent Community Bankers Association (ICBA) began promoting a plan that could reduce mortgage interest rates by 1% to 1.5%.
The ICBA was supported by the National Association of Realtors (NAR), and Community Home Lenders of America. Together, these three submitted a letter to The White House and Treasury Department outlining a plan to reduce the historically large spread between 30-year mortgage rates and 10-year Treasuries.
ICBA states that their proposal could reduce mortgage rates by up to 150 basis points. They also recommended that the following changes take place:
- The Federal Reserve should shift its policy to maintain its stock of mortgage-backed securities (MBS), suspending runoff until the spread between the 30-year fixed-rate mortgage and 10-year Treasury note stabilizes.
- Fannie Mae and Freddie Mac should be enabled to purchase their own MBS and/or Ginnie Mae MBS for a temporary period of time.
“The housing shortage is structural for the time being and has a significant impact on inflation,” the letter continues. “Our groups thoroughly respect the independence of the Federal Reserve but believe it should take this structural issue into consideration when evaluating strategies to attain the Fed’s desired 2% inflation target.”
The path from scouting homes online to meeting the moving van can be a complicated one. But knowing where to go for help — starting with a great Realtor and expert lender — gets you headed in the right direction. Connect with us today to see where that path will take you!
If you would like more information about financing a mortgage in today’s market, please contact Brian Bonnet at [email protected] or call 703-766-6702.
If you would like a question answered in our weekly column or to set up an appointment with one of our Associates, please email: [email protected] or call 703-549-9292.
McEnearney Associates Realtors®, 109 S. Pitt Street, Alexandria, VA 22314. www.McEnearney.com Equal Housing Opportunity. #WeAreAlexandria