Reflection by Brian Liebig Jr. and Jeff Rupich, Mortgage Loan Originators at US Bank
The demand for purchasing a home remains high despite the dramatic increase in mortgage rates this year. There are some who have put their search on hold for now and have attributed that decision to not only the rising interest rates, but also the increased housing prices and the housing inventory shortage that still exists. Most are forging ahead despite these challenges. I’ve been working with some hopeful buyers who have been looking for the better part of a year, if not longer, and I had one pre-approval client, who has been looking for over a year now, recently tell me that they are more determined than ever to purchase a home. For anyone who is looking to purchase a house, it continues to be very important that they get fully pre-approved vs pre-qualified since a pre-qualification is only a preliminary review of a potential buyer’s ability to qualify. An official pre-approval letter reflects that, in addition to an application being submitted and credit being checked, their documentation (W2s, paystubs, etc.) have also been collected and an underwriter has reviewed and issued an approval. The pre-approval will make someone a more competitive buyer than someone who is only pre-qualified to purchase a home.
The climate today is still very competitive. Buyers need to do everything to make themselves standout from the competition. Pre-approvals are fine, but sellers want to see more. Sellers want to make sure that the offer they select is rock solid. Sellers don’t want to waste their time because they either need to sell to buy their new house or need the money now. Therefore, buyers need to be ready to do a full application right away to get their loan underwritten so they can have an approval letter when they submit their offer. Buyers need to have their last 30 days of paystubs, last 2 years W2’s or full year’s tax returns, and 2 full months of bank statements on stand-by. I have had a lot of success helping people secure offers because they were approved. It’s a lot of work up front, but buyers will need to provide it anyway and it makes the home buying process go much smoother. Doing this also allows for a quicker close time as well.
Some markets throughout the country have begun to cool a little. I recently spoke with a realtor who is based in Colorado and another who is in Georgia, and they each mentioned that homes in their markets are starting to sit a little longer than previously, plus sellers have not able to get items like inspections and appraisals waived. Unfortunately, housing prices have continued to increase in these areas, but at a slower rate.
There has been an increase in the number of people who are looking into building a home now vs getting a turn-key home. Given the amount of time it has been taking for many people to find a completed house to purchase, they’re realizing now that they could build a new home of their own in roughly the same timeframe. US Bank is well-positioned to capture a lot of the increased demand in this market space with our builder mortgage products, which provide long-term rate locks for up to 360 days. This is a very competitive option since it typically takes around this same amount of time for a new home to be built and it protects buyers from any further increase in mortgage rates – increasing rates can effectively price some people out of their purchase due to no longer qualifying based on the higher mortgage payment. Additionally, it provides a float down option that can be exercised within 60 days of the house being completed which allows buyers to take advantage of lower rates if they happen to decrease while their house is being built. It’s important to note that the builder market has its own challenges to contend with as well: not enough laborers to build homes, supply chain issues, increasing costs for materials.
Whichever route you decide, home ownership is possible! It will be a lot of work and preparation, but people are closing on homes, so you can too!
Thank you Brian and Jeff for sharing your knowledge on this topic with us! If you would like further information about home ownership or US Bank’s Mortgage Loans, feel free to contact jeffrey.rupich@usbank.com or brian.liebig@usbank.com for more information.