Staying in Touch With Your Lender

In today's housing market, it's more important than ever before to stay in close communication with your lender throughout the home searching process. A big part of this is because people are taking longer than ever to find their perfect home. We have some people that, sure, they find their house within a week or two or three, but there are many people that's taking months now, some people from last summer that we're still looking to find a house for today. And that's just the landscape of the market. You know, inventory is very tight. There's a ton of buyers, more than ever before. So just a very crowded market takes a while to find the perfect house to land on. Perfectly acceptable makes perfect sense. But the big thing here to keep in mind is what somebody might have qualified for a few months ago could be very different today. So in many different reasons. So for one, house prices are more expensive. So the ballpark price range they might have looked at previously, well, maybe that's not the house for them today. You know, if There was a $300,000 house last summer, well, you can't quite buy the same amount with 300,000 today as you could last year, for example. The other one is interest rates. Even though we make a very, very strong effort, I've put all my resources to making sure we have the thinnest margins possible to stay roughly about a half percent lower than most of the market on interest rates. Still, rates have gone up for everyone out there, every lender out there. And if you think of it, you know, most people try to, you know, it seems that most people get kind of approved for very close to their maximum amount, or they at least want to know what their limit is. Well, that would have been possibly what their limit was a few months ago or last year when the interest rates were different. And with how rates have crept up, I mean, many people's payments, if they haven't already landed on a house, unfortunately, have gone up a couple hundred bucks. And that's even with us keeping the leanest margins, lowest rates possible. And that's, that's created a difference in what they could qualify for. So it's very important to refresh it, because the last thing you want is to go under the assumption you had this much of an approval from a few months ago, it's expired now, and then you go out, you finally find the perfect house, and then all of a sudden, oh, shoot, with today's current rates, you no longer qualify for it. That's not something that anybody wants. That is why we keep a Weekly update call to all of our buyers just to stay in the loop of how their home search is going, refresh them on their pre approval. And the other big one are down payment assistance programs. So if you, if you break it down people piece by piece, it actually makes quite a bit of sense here. So you know, interest rates used to be in the 2 to 3% range for the last couple years. And if we keep that in mind and compare that to the current market where rates are around 5% or 6% for some lenders. So from the 2 to 3 to 5 to 6% rates have gone up a couple percent. Well, many of the down payment programs, in fact, you know, I can think of one in particular where rates are always six and a quarter, 6.25 back when normal traditional rates were up, let's say 3%. So they always kept about a 3% buffer there between the traditional market with a real, with a down payment versus the no down payment option which they pay for in the interest rate. Now the entire mortgage market has crept up to now the 5 to 6% range for traditional financing for people that do have a down payment. So you take that same train of thought there. That would mean that the no down payment options, well, they were six and a quarter. If you tack on 2, 3 more percent, that's you know, 8, 9% now. But those have reacted a little bit different to the volatility and the increase in the mortgage market. So the reason being they're not just equally increasing their rates the same with the normal market does where they both go up and down together. Because so if you have a super high interest rate and there is a decent chance that in the next year or two or three, their rates kind of come back down and there could be a little bit of a refi boom again. So the only way that pays off for those programs that do the zero down payment to take on that extra risk, they have to in turn get a higher rate of return on interest because they know some of those very well might be defaulted on. So they have to get a higher return for that to make any sense at all. And, and that's program by program. But they all have a similar thought process on that. Now if they just continue increasing with the mortgage market and they're offering a 9% interest rate, well, if you really start breaking that down, shoot, if that person gains a little bit of equity and they kind of get their feet, which right now, you think about it, houses are gaining equity left and right like crazy leopard to jump into a 9% mortgage, wait a couple months, their house goes up in value enough to now they have enough equity to refinance and still fit within the ratio. They almost like earned their down payment just by living in the house. And they can refinance right out of that really, really quickly with how rapidly home prices are going up on one side of it. And the other side would be that rates very well could be going down in the next year or two and kind of a little bit further out, not right away. So they're probably only going to receive interest on that for a very short period of time. A normal mortgage is actually paid or kept for about six, seven, eight years. They say. They're saying that if the 9% interest rate is what somebody has, they're probably going to keep that for a year before they refinance or get out of it. So they're not going to ever recoup the amount that they need to recoup on those programs. So what they've done, they kept their rates very, very still. The rates went from like six and a quarter to 6.75 for some of the programs. So it's only a half percent increase, while the rest of the market had a 2 or 3% increase. So very, very small. But what they did is they started packing, instead of increasing the rates, they started packing it into the upfront fees. So which really it's here nor there, one way or another. They're just trying to get their money. But the reason they're doing that is instead of on the rate, they're packing it in upfront, like origination charges on some of those programs because they want to get their money up front. They know, hey, the way the market's going, the housing market went crazy. So if people have equity to refi or if rates drop in the future, people are going to get out of this loan. We have to get our money. Speaking as them third party here, they want to get their funds right up front so they can see it. It's an upfront cost, so they're collecting it. The tough part about that is on a down payment assistance program, you know, those people don't have a down payment. So they can cover, let's say, three and a half percent down payment on an FHA loan. And in exchange for that company, that the investors wanting a 2 or 3% discount point or origination charge to do that loan. So they're pretty much saying, we'll cover your three and a half percent if you give us two or three percent back. Well, that doesn't work. That's the whole reason why the person's in a down payment assistance program. The only difference there is it can be rolled into seller, seller's side of the equation. So the buyer still doesn't necessarily have to cover it, but somebody does. Those programs are only now, for the most part, offering the down payment assistance if somebody pays them an upfront fee. The one little loophole or silver lining is that it can be negotiated where you build that into the offer with the seller, and the seller maybe pays the closing cost and that 2 or 3% fee to the investor for the down payment assistance program. But it makes it very tough. And that's why when you really start unpacking it level by level, it makes sense. But it is a tougher environment for everyone, especially the down payment assistance programs. And that's why high risk, quick turnover, because, you know, house prices are kind of a breeding ground right now for refinances not that far down the road, especially if somebody has a very, very high rate like those down payment assistance programs. So they shut the rate increase off and just started packing it into the upfront fees. That's a little bit deeper. Dive into it. And that's why the down payment assistance programs are having a little bit more volatility than the rest of the market.