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Op-Ed: How Mortgage Lenders Can Assist Buyers Through a Challenging Marketplace

There’s been a lot of focus and discussion over the aggressive interest rate hikes this year, the wreckage inflation is having on everyday spending, and the rising costs of mortgage borrowing. For homebuyers, the environment might resonate as nearly impossible to surmount. But mortgage lenders can help homebuyers look beyond the doom and gloom and uncover some real opportunities to be competitive and successful in today’s housing market.

Lenders certainly shouldn’t ignore the impact the sudden rise in rates is having on consumers who continue to grapple with rising costs across the board. The impact on the broader economy is palatable and causes jitters for consumers and lenders alike. My response is to ask if they are doing anything to combat the current market conditions to set their business up for success now and into the future, like targeting occupations that could be considered “recession-resistant?”

For us here at Homes for Heroes, focusing on serving our clients who are gainfully employed no matter the market conditions and connecting with them a local mortgage and real estate specialist that can help them achieve their homeownership goals and get a check back as a Thank You is what we do best. These professions are in high demand and are in dire need of housing in the communities they serve: Firefighters, Law Enforcement, Military, Healthcare Professionals and Teachers. If you need potential borrowers, we got them!

Even so, they’ll have questions on whether or not now is a good time to buy. A good place to start is by debunking the narrative that we are living in a time of record high mortgage rates. It’s true that we have seen the rate rise rapidly since the beginning of the year but the national average on a 30-year fixed hovers at just over 5.13%. That’s well below the 50-year average of 7.77%.

The Federal Open Market Committee (FOMC) raised rates at its July meeting by 75 basis points to combat rising inflation, bringing the target range for the federal funds rate to 2.25% to 2.5%. This marked the fourth time in 2022 that the Fed raised rates.

At the moment, it looks as if the Federal Reserve isn’t abating on its campaign to curb inflation. The question is how far do they plan to go?

The best course could be to help borrowers focus on the positive economic news that is emerging. Freddie Mac for example said recently that while mortgage rate volatility persists, there is some stability emerging in house prices. Plus you can always refinance the homebuyer's loan when rates get lower.

CoreLogic recently predicted that home prices will slow to an annual gain of 5% by May 2023. What’s more, buyers in the current housing market have much more supply to choose from in a less competitive environment.

The inventory of homes for sale in July increased to levels not seen since mid-2020, according to Realtor.com. The list of homes actively for sale on a typical day in July increased by 30.7% over the past year, the most significant inventory increase in the data's history and higher than last month's growth rate of 18.7%. The share of listed homes with price reductions reached 19% in July, closing in on levels not seen since 2017.

Lenders should reassure borrowers that what we are seeing today is a return to a “normal market” after an unprecedented real estate boom fueled by several factors including the pandemic, low-interest rates, low inventory and technology that has shattered the playing field.

Buyers should be encouraged to work with their real estate agents to make sure they use all the tools and resources at their disposal.  It’s our job to ensure the borrower understands everything they need to be successful and that often starts with making sure their credit is in order.

It may seem rudimentary but it’s the key to unlocking the best deal available. A recent Zillow analysis showed that borrowers with lower credit scores pay nearly $103,626 more in interest over the life of a 30-year fixed loan compared to borrowers with excellent credit. That’s nearly $288 more a month in payments over the life of a loan.

Lenders should also make sure that homebuyers are aware of the different products available that are designed to tackle affordability issues. For example, the idea that a down payment has to be 20% in order to qualify for a mortgage would keep many would-be homebuyers sidelined. That’s a lot of cash to come up with upfront.

A down payment of 20% has been a long-held rule of thumb for conventional mortgages, but if you go with a VA loan or a USDA loan, you won’t be required to make a down payment at all.

Beyond these mortgage products, homebuyers should know that there are several products available that require no more than 3% to 5% of the purchase price as a down payment. Plus, there are loans, grants and thousands of down payment assistance programs that may help cover these costs. Almost 16% of all programs provide special incentives for veterans, active military, doctors, firefighters, educators, and healthcare workers, according to Down Payment Resource (DPR).

On average, heroes save $3,000 when working with our Homes for Heroes specialists. Click here for more information.

About Author: Abby Waltz

Abby Waltz serves as National Director for Homes for Heroes, a nationwide network of affiliate real estate, mortgage, and local business specialists all committed to providing easy ways for heroes to save on a home. Since 2009, Homes for Heroes has helped more than 53,000 heroes save nearly $100 million on their real estate transactions, sold more than $13.7 billion in real estate to heroes, actively partnered with more than 4,200 like-minded real estate and mortgage professionals who’ve joined in the mission, and has donated in excess of $1.1 million to heroes in need through the Homes for Heroes Foundation.
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