Exploring Program Options in a Tight Market

The Mortgage Voice
The Mortgage Voice
Exploring Program Options in a Tight Market

Mortgage rates have jumped from 3.5 to 5.25% for a 30-year fixed loan in the first quarter of this year. Most realtors will advise buyers that the market is tight, so they need to be financially qualified, have a good credit score, and be prepared to pay more than the property is worth to compete with others vying for the same property. Prices affect demand because if they are high, fewer people will be able to afford to buy and leave the market, meaning prices need to return to a reasonable level to create demand again. The 15-20% + increase in real estate prices around the country over the last year is unsustainable in the long term, so once the market slows down, inventory will begin to replenish, bringing more pricing stability with the likelihood of housing costs lowering even further.

For buyers looking to live in an area for a short time before moving somewhere else, an ARM, or Adjustable Rate Mortgage, might be a possible option, although it is sometimes riskier. For example, the fixed rate period on a 5-1 type is five years, with the adjustable rate changing every subsequent year after that for the term of the loan. The 5-1 ARM is currently one point less than a 30-year fixed, and with one point on every $100,000 equal to $100, that can be a substantial saving in interest payments if the buyer is only going to keep the property for five years or less.

Working with a very well-qualified professional to help explain in depth the pros and cons of the various program types, including non-QMs, is essential, as is finding a lender that does in-house underwriting and can do manual underwrites if necessary, especially where non-QM loans are concerned. In the current market, exploring every avenue can make all the difference in securing that just-right loan. Jeff’s guests include:

– Eddie Rael (Realty 1 of New Mexico) discusses the New Mexico real estate market.

– Charles Giscombe (Malibu Funding) talks about these volatile times and directly addresses rising interest rates.

– Brenda Scott (Malibu Funding) tells Jeff about raising credit scores to get favorable loan terms.