By Julie Piepho, Principal, BlackFin Group
This Is an old phrase, but one I believe is worth repeating, especially considering March’s FOMC announcement. I don’t know who to give credit to for this, but I’m going to repeat it here:
“In 1971, the interest rate for a mortgage was 7.33%. If you waited for interest rates to go down, you wouldn’t have purchased a home until 1993. You would have rented for 22 years waiting for rates to go down, meanwhile the value of real estate quadrupled. Don’t wait to buy real estate. Buy real estate and wait. Marry the house, date the rate.” Unknown
It’s time to do a mind re-set with your loan officers and borrowers. There are still the same issues as always; lack of inventory, lack of down payment for first time homebuyers, the new NAR agreement on buyers’ agent commission and how is that going to play out, but it’s spring and homebuyers are pre-qualifying and wanting to move. It’s the age-old cycle. Don’t let rates get in the way.
Chairman Powell said it will be appropriate to slow the pace of asset runoff soon, which means the rate cut should happen in June. This is a psychological statement for us, which brings hope to the economy. As you are working on bringing your income statement to the black, utilizing techniques such as mandatory deliveries instead of best efforts, work with your loan officers to utilize rate techniques on the pre-qualifying of borrowers to get into houses NOW instead of June.
Buy-downs are still a great tool. If the realtor wants to decrease the price on a house to sell (see Russell Wilson’s home in Seattle!), ask them to give you the money for a buy-down for the borrower. Yes, the borrower still must qualify for the full note rate, however, it still helps the borrower get into the house and save money for expenses such as moving, furniture, home improvement, etc. and keep the comparable for the neighborhood up.
Your loan officers should know by now how to refer the borrowers to a tax planner for the interest payments and how it helps their annual tax bill. Add in the projected appreciation for the period the borrower believes they will be in the house, and it starts to make sense to buy now, rather than wait until rates come down. Prices will continue to increase, multiple offers will happen, and the buyers will lose out again.
Down payment assistance programs are available for first time homebuyers, it just takes a little research to find the correct one. It still amazes me that many buyers believe they need to put 20% down. Have your loan officers be the educators in the community. Community colleges, micro-breweries, churches, coffee houses, can offer small groups of potential homebuyers, along with working with your new buying agent! Be the loan officer that is out there—not waiting for the rates to go down.
Athletes work with psychologists to hone their game – you can be the psychologist for your loan officers to change their mindset to change borrowers’ mindset that NOW is the time to buy – even with these rates!
Julie Piepho, CMB, is a Principal Consultant with BlackFin Group in the Mortgage Strategy Practice. Julie is nationally recognized as a Mortgage Strategy Consulting expert with over four decades’ experience leading and coaching sales and operations teams while in executive roles at Cornerstone Mortgage, Norwest Mortgage and Wells Fargo Mortgage. She holds the prestigious Master Certified Mortgage Banker designation from the Mortgage Bankers Association. For more information on how we can help contact info@blackfin-group.com