June is National Homeownership Month! One of the barriers we often see to homeownership is potential buyers being fearful or hesitant about the home financing process. This week some frequently asked home financing questions are being answered by a lender. We interviewed Chris Meeker, Loan Officer at Center City Mortgage and Investments (CCMI), our preferred in-house lender at KW Philly.
- What types of home loans do you offer?
At our core, CCMI is a residential lender that helps hundreds of buyers through the home financing process each year. We offer conventional loans, Federal Housing Administration (FHA) loans, and VA loans which are mortgages offered through the U.S Department of Veterans. We also offer a full range of “out of the box” options for investors and new construction. We also offer loans that help finance a rehab project and a wide ranger of jumbo products for higher price points for properties that have 4 units or less.
- How do you know which home mortgage option is right for you?
The qualifications of the buyer will dictate the best option. These qualifications include but are not limited to income, assets, credit, and employment. We also consider the property type and the intentions of use. We discuss these qualifications in detail to understand a buyer’s unique situation.
- What is the difference between being pre-approved and pre-qualified?
Pre-approval warrants that an underwriter has reviewed the borrower’s qualifications and has issued a conditional approval subject to finding a property. A pre-qualification means that the loan officer has received an application and run credit. Based on information that has been supplied by the client, we are able to qualify them for a specific loan amount or price point. Making an offer on a home requires pre-qualification.
- How has the recent increase in interest rates affected the real estate market?
Many in the industry wonder if higher interest rates might reduce the demand for homes and stabilize prices. However, that’s not what we have experienced yet. I do believe the higher interest rates are limiting the maximum purchase price of a moderate income buyer. This could phase some buyers out of the market or discourage them from continuing to search. We anticipate that this could stimulate the rental market further for this demographic. The good news is, rates are temporary, so if and when rates drop down, homeowners will have an opportunity to refinance to cut their payment. What isn’t likely, are property values dropping since inventory remains historically low. If buyers hold off, they will still experience higher payments due to increased prices. I believe it is best not to wait to purchase a home.
- Why is it important to talk with a mortgage professional sooner rather than later?
Buyers need to know what they can afford. Our approach at CCMI is holistic. During an initial client phone call, we discuss long-term financial and personal goals. We do not just tell buyers, “here is your max, go ahead and find a house.” Our approach is to have the client understand how lending works to assure that they make the right decision for them and their family and to assure a smooth process.
- What kind of information will a mortgage professional need to collect in order to identify the right mortgage product for me?
We collect income documentation such as pay stubs, tax returns, W2s, asset documentation such as bank statements, investment account statements, and possible gift letters from family members that wish to assist. We run credit and review it with the clients and suggest ways they can improve scores if necessary. In the end, it’s all about understanding our client’s goals.
- What creative financing options are popular in the market right now?
There are lots of creative options for investors that may not require true income qualification. CCMI offers programs who wish to vest a property in an LLC to close in the entity’s name rather than their personal name. This is a specific, non-conventional program that allows for purchases based on the cash flow of the property rather than the income of the buyer. I also see adjustable-rate mortgages (ARMs) becoming more popular given that the fixed rates have increased so quickly. Clients can save 1-2% on their APR by exploring these products and in some cases they are the best choice to make given the potential length of time a buyer feels they may stay in a property. We do discuss these options more often these days and it could end up saving clients thousands of dollars over the first 5-10 years. It really takes discussing an individual’s unique situation to find the best options for the client.
Want to learn more?
Working with a lender to secure a mortgage is just one part of the home buying process. If you want to learn more, check out the video below of PhillyLiving’s Sales Manager and experienced Realtor, Kelly Steyn. She breaks down each step in a way that makes buying a home seem a little less daunting.