I had a chance this week to sit down with Matt Young and talk about financing. Matt is a loan officer at MDC Financial Services Group and was recognized in 2012 and 2013 as a member of the elite class of the top 1 percent of mortgage originators in the U.S. He knows his stuff.
Del Phillips: Matt, can you give us a status report of the mortgage market right now?
Matt Young: The mortgage markets are slowly creeping back toward a more normal lending environment. Since 2006, we have seen the markets in very abnormal lending environments, from almost no regulation to an over-abundance of regulation, from rates in the 7 percent and 8 percent range in 2004 and 2005, to rates in the lower 3 percent range last year; and from crazy-inflated home values to drastically low home values. In June 2013, rates jumped out of the 3 percent’s and into the 4 percent’s almost overnight. Rates haven’t looked back and it’s doubtful that we will see rates that low again.
Is the 4 percent interest rate a thing of the past?
It seems that way. What we do know is that a rate in the mid 4 percent’s is still really, really historically low. Most buyers who had “sticker-shock” when rates initially jumped above 4 percent are now beginning to hear more and more experts talk about the increasing likelihood of higher rates in the coming 12 months and now see a 4.5 percent rate as a significant opportunity. When you combine that with the increasing property values, it is easy to see why buyers are quickly and eagerly snapping up homes that are listed for sale.
What kind of loan is available to me now?
It wasn’t too many months ago that the types of loans available were limited primarily to “conforming” loans backed by Fannie Mae or Freddie Mac, or FHA and VA loans, all primarily 30-year fixed loans. Now, however, we are seeing additional loan types being added by investors, most notably more jumbo loan options (for loans over the San Diego County conforming loan maximum of $546,250) and construction/rehab loan options.
Is it hard to get a loan these days?
That is both true and false. It’s false in the sense that mortgage money is readily available for anyone who qualifies. However, it’s true in the sense that a buyer needs to be prepared to provide a lot of documentation. This is especially true when it comes to the paper trailing of bank deposits. Under the federal anti-money laundering rules, mortgage providers are now required to confirm the source and tracing of any “large” deposit on a borrower’s bank statements that are provided. This can be tedious and often seem to border on the absurd, but what I tell all of my borrowers as they begin their house-hunting process is to keep copies of any checks you deposit and be prepared to provide an explanation should the underwriter request one. This is the toughest part of the mortgage process for borrowers. But if you are prepared, both in terms of your documentation and your mental outlook, you will get through it easily. If you have any questions whatsoever related to money, cash, and the transfers or deposits of it, please ask your mortgage advisor beforehand so that he or she can point you in the right direction for how to handle them.
How about a VA loan? Can I get one of those?
Yes, if you are VA-eligible; this generally means that you have prior active-duty military service. VA buyers can borrow up to $527,500 (the San Diego County max) with $0 down. Even better, loan amounts can go as high as $1million with the borrower contributing a down payment of only 25 percent of the amount over and above $527,500.
That is the equivalent of only 12 percent down on a $1 million purchase! And there is no monthly mortgage insurance!
I found a home that needs work. Is there a loan out there that will give me the funds to buy and rehab a home?
Yes. Rehab loans are a great option for buyers looking to buy a home in need of some work. There are a couple of options out there: FHA’s 203K rehab loan, as well as Fannie Mae’s Homestyle renovation loan. Both require the use of a “consultant” that will act as the liaison between the buyer, contractor and the lender and will be the main “guide” through the process. Rehab loans allow the buyer to have the identified home-improvements financed into the loan amount at a predetermined level based upon the “completion value” of the home. Unfortunately, investors are not allowed on this product, it’s currently only offered for primary residences.
All in all, according to Matt, rates are still affordable, and loans are available for qualified purchasers. All home buyers want to find that “sweet spot” when there are good homes on the market, prices are reasonable and interest rates are relatively low. It all adds to the conviction, held by many, that now is one of the best times to go home shopping. Happy hunting!
Del Phillips is a California Licensed Real Estate agent. He is a member of the National, California and San Diego Association of Realtors. You can reach Del at Ascent Real Estate at 619-298-6666 or at Del@DelPhillips.com DRE LIC #01267333.
