We received a fantastic question from a buyer a few weeks ago. He asked, “What do current mortgage rates look like and who do you suggest I talk to?” For this, we will let our expert advisor Matt Jablonski, Loan Officer from Citizen’s Bank, take the stage and answer some questions that are fitting from an on the ground perspective. Matt, the mic is yours:
1. Where are we, with mortgage rates in relation to a year or two ago? What do you think is going to happen in the next 12-24 months?
Mortgage rates are still historically low. The biggest shift is probably in the “jumbo” mortgage market. It wasn’t that long ago that a homebuyer would have to pay a higher interest rate to borrow more than the conforming loan size limits put in place by Fannie Mae and Freddie Mac. Now, in many instances, homebuyers have access to low interest rates when they borrow more than the traditional conforming loan size limit of $417,000.
2. What is the most conservative product you have? What is the most aggressive product you have? Which are buyers mostly opting for and why?
The most conservative product will likely always be a fixed-rate mortgage. A conventional 30-year fixed-rate mortgage is still the most commonly used mortgage product in U.S. A client’s principal and interest payments would never change no matter how long they’re in a fixed rate mortgage. If a client is willing to take on some risk (the risk that their interest rate might change in the future), they could choose an adjustable rate mortgage (ARM). In exchange, that client would typically see a reduced interest rate. Citizens Bank does offer 3/1, 5/1 7/1 and 10/1 ARMS products, but we also offer a 5/1 and 7/1 interest-only ARM, which is definitely a popular product in the New York City’s jumbo mortgage market. Another factor to consider is how long you expect to stay in the home – if you aren’t planning on being there for more than 5-7 years, than an ARM might be the right product for your needs.
3. Many banks require a banking relationship with the borrower to give them favorable rates, does Citizens Bank require that?
We do not require a banking relationship but you can save a 1/8 off your interest rate by opening a Citizens checking account with your monthly payment automatically debited from that account.
4. The Margolis Team loves working with you because you are so thorough and professional; do you have any anecdotes to illustrate how we got a very complicated deal done together? One that probably wouldn’t have gone through without a collaborative partnership?
Every purchase transaction is its own unique journey. My relationship with the Margolis Team works because everyone involved proactively goes out of their way to identify any potential pitfalls before we’re even in contract. The ability to do that comes with experience. For example, the realtors on the Margolis Team understand the difference between a warrantable condo and a non-warrantable condo and all of the factors that might make it difficult for a lender to offer financing in certain buildings (i.e. low owner occupancy levels, too much commercial space, or a budget that is not allocating enough toward reserves). Identifying those pitfalls and asking all of the right questions early-on in the process allows me and the Citizens Bank condo approval team to make a determination on a building very early-on in the process.
5. Are there any foreseeable changes coming down the pike that would impact buyers? Any tips for buyers?
Guidelines in this industry are constantly changing. But, no matter how much they change, the basics will always be true to some degree when we’re talking about a person’s ability to borrow money to purchase a property. During the pre-qualification process, I try to simplify things for my clients and explain that there are really four components to every mortgage application:
1. The property itself. A lender wants to make sure a property is worth what the client is paying for it (by way of an appraisal). And, if it’s a condo or coop, a lender will make sure the building is financially stable and properly insured.
2. Lenders will look at a borrower’s credit profile to see if there is any derogatory information in that borrower’s recent history that would prevent them from moving forward with a mortgage.
3. A lender will verify that a borrower has enough liquid assets to cover their down payment and closing costs.
4. A lender will make sure that a borrower can afford to make their mortgage payment. They’ll do this by comparing their gross monthly income to their already-established monthly obligations as well as the projected total housing payment for the property they wish to purchase.
The best advice I can give is to keep it simple using those four components along with a good team to guide you through the home-buying process. There is more government regulation today than there was just a few years ago. This doesn’t necessarily mean it’s more difficult to obtain a mortgage for someone that is qualified, but does mean a lender is required to collect more documentation during the loan process to prove that a borrower is truly qualified to borrow the amount they are seeking. If a homebuyer goes into the mortgage process understanding and expecting the lender to ask for more information compared to the last time they may have applied, it might lead to a more pleasant experience with less anxiety.
Loan Officer | Citizens Bank N.A.
Home Lending Solutions – Mortgage
707 Westchester Avenue, Suite 104
White Plains, NY 10604
125 Park Avenue, 18th Floor
New York, NY 10017