What role does a lender play in the homebuying process?
The mortgage lender is going to look at the buyer’s situation, credit profile, income, all of that, and find the best loan that fits their needs.
A loan officer will be there before they find a contract, so that way they know how much they qualify for. Then, once the contract comes in, the loan officer walks through the whole process—through underwriting and closing and everything, all the way to the end.
Who is applying for mortgage loans now? Is it mostly first-time buyers or people who have previously owned a home?
I have a lot of first-time homebuyers, and they’re having a hard time being comfortable with the way prices have gone up so quickly. So, the people that are actually getting the houses and getting contracts accepted would be the people who have owned before, the more seasoned buyers. First-time homebuyers are definitely struggling in this market.
What assistance programs are available to first-time homebuyers?
Right now [down payment assistance programs] are very limited. It used to be you could get [assistance with] 3%, 4% or 5%, and that’s of the loan amount to go toward down payment and closing costs. But right now, they’ve added a 2% and gotten rid of the 5% and most of the time it’s hard to even get 4%, so it’s really just 2% and 3% is all that’s available because the market is so volatile.
Sometimes there’s stipulations to these programs, so it’s money they don’t need at closing, but they might have to pay it back depending on how long they’re in the house. Then, there’s one that’s a pure grant. It just depends on the program.
How is the Federal Reserve increasing interest rates affecting home loans?
It’s affecting first-time homebuyers for sure. You may have someone that maybe even last year could have qualified in Cedar Park may have to go all the way to Hutto or way out to just find something in their price range because the interest rates end up making payments higher. I’ve had a few buyers where they were looking in December and hadn’t found anything, but now the payment for the same house—just because of the interest rate—has gone up $400-$500.
What will be the near-term effect of rising interest rates?
I would imagine—and we are already starting to see it—the values are going to start to stabilize. We’re not going to have as many people bidding on all the houses, so they are going to start to level off.
We’ve seen value increases across the board in the Austin area for the past year and a half. I’ve been in the business for over 20 years, and I’ve never seen tax values do what they did this year. At a minimum, all of the houses have gone up $100,000 in tax value. I don’t think [prices] are going to go down because businesses are moving to Texas; I just think they’ll start leveling out.
What is the difference between an adjustable mortgage and a fixed-rate mortgage?
A fixed-rate mortgage is going to stay the same. The rate stays the same for the entirety of the mortgage to where an adjustable rate mortgage will fluctuate up or down based off of the index that it’s tied to.
There [are] different indexes that the [adjustable rate mortgage] could be tied to. So there’s something called a 5/1 ARM, so what that means is that it’s fixed for five years, and then every year after that, the rate can adjust every year for the rest of the term.
Who decides whether a buyer will have a fixed-rate or adjustable mortgage?
What we would do is if we think it’s a benefit, we could compare the two. Right now, the rates on the adjustable rates aren’t really any better, so there would be no reason to suggest an adjustable rate right now. But if there was a time that rates are really high and adjustable rates get to be lower, then someone may qualify on an adjustable rate versus they may not qualify on a fixed rate. Everybody is doing fixed rates right now.
Are people still refinancing?
The refinance market is pretty much dried up right now. The only people that might refinance would be someone that has to get cash out of their house. Or, I’ve had some people refinance because they’re getting a divorce and they have to refinance the other person off the loan. Very few people missed the boat when the rates were low for the refinance.
How can home equity be used to a homeowner’s advantage?
The best way to do a home equity right now would be a second lien. That way, if you have a good rate on your first lien, you don’t have to touch it. Basically, you get a second mortgage.
An equity loan could help people pay off debt, do home improvements, pay for college, just have money for a rainy day with the crazy economy happening right now. So there’s lots of ways that an equity loan would still be beneficial.
Benchmark Mortgage
715 Discovery Blvd., Ste. 212, Cedar Park
512-244-6490
https://austin.benchmark.us
Note: This article is part of Community Impact Newspaper's annual Real Estate Edition.
