Getting a Home Loan in 2022
One of our realtors, Rod Mollus, sat down to discuss the home loan process with loan officer Mandee Schrick of Mutual Savings Association.
In the full video interview, they had really valuable information to share on the following topics:
0:45 What’s going on with interest rates right now?
1:28 Advantages of considering an adjustable-rate mortgage
5:30 Advice for a first time home buyer
7:41 Is lending more strict or less strict these days?
9:29 Advantages of using a lender who services their own loans
13:56 Is this still a good time to buy a house?
15:39 What should my credit score be when I apply for a loan?
The following are highlights of their conversation. If you want to know more, check out their full conversation here!
Rod: When it comes to buying a house, the lending side is really important right now. Everybody is trying to figure out what the interest rates are doing. So much of what’s going on has caused people to take a step back. Even experienced homebuyers are stepping back right now, trying to figure out what’s going on in the big picture. So I guess I wanted to ask you first off what’s going on with interest rates here in St Joseph?
Mandee: Well, I can tell you where rates are at now and where they were in the past. But going forward, none of us really know. We say that it’s kind of like the stock market: everybody wants to talk about it but nobody truly knows where it’s going.
So the important thing to do in this environment is to meet with an experienced loan officer that can sit down with you and give all the perspectives. Then you can make the best informed decision possible based on the information the loan officer has provided.
When it comes to getting a mortgage loan, there are lots of things homebuyers can look at. One thing that people are usually scared of to even address is looking at an adjustable-rate mortgage (ARM) program. But there are some big benefits to an ARM, depending on your specific situation. In an environment like this, for example, you could do a 5/1 ARM which is going to be fixed for five years and would have the option to adjust after that. But the difference in the rates right now is huge. You can do a 5/1 ARM at 4.75% interest versus a 30-year fixed mortgage which is close to 6% right now.
What you choose will depend on what your long-term goals are. If you’re a first time home buyer, you may only plan to live in that new home for three to five years; so if you can take advantage of that lower ARM rate, then you’re saving yourself a lot of money.
R: Absolutely. Let’s talk about first time home buyers some more. Right now, they aren’t sure that this is the right time to be jumping in to buy a house. They are wondering if they should keep renting. But we’ve seen rental costs go up 14% on average across the country. We’ve even seen some rates as high as 30% in some regions. I don’t think a 2% or 3% increase in interest rates is going to equal that out, right?
M: Correct.
R: So what advice would you give to a first time home buyer?
M: The first thing you want to do is go through the pre-qualification process and find out what you qualify for. We will qualify you for the maximum based on your scenario, but the more important thing is for you to determine what you are aiming to pay per month. If you are aiming for an $800 per month mortgage payment, then we can help you calculate what price range of houses you should be shopping for.
People oftentimes find that they qualify for much more than what they’re even interested in paying. So again, the more important questions are Where are you comfortable payment-wise? What does that look like? And can we get you there?
R: Before people start looking at houses for sale around St Joseph, it’s best to get pre-qualified first so they're ready to buy when they find the right place. But are we seeing lending stricter or are we seeing it less strict right now? What should people be concerned with?
M: It has loosened up a little bit over the last couple years. In my opinion, I don’t think we’ll ever find ourselves in the scenario that we were in 20 years ago. At that time, lenders were lending 100% to 103% of a sales price. Of course, after everything fell out back then, lenders as a whole tightened up a lot. So I just don’t see us falling back in that exact situation. So home lenders are a little more cautious now than they were 20 years ago. But with that being said, they’ve also kind of loosened back up a little bit on some of those things.
R: Okay, now moving away from first time home buyers, what would you say to people at this point that are looking to buy a new house that’s bigger and go up in size versus staying where they’re at? Do you think it’s still a good time to continue to buy houses?
M: Yes I do because there are so many different options out there. Again, back to what we said earlier, it all depends on your long-term goals. You’ve got those ARMs you can look at, but then again, we’re not going to put you into something that you can’t afford. So the biggest takeaway from this is that you want to get in and work through the process and see what you qualify for, and determine where your comfort level is. We’re not going to put you in something you can’t afford. We want you to succeed just as much as you want to succeed.
R: That’s great. Well, thanks for your time and all that helpful information!
If you are already house hunting or just thinking about buying a house in the future, reach out to Ramseier Group for all of your realty needs. Our team of realtors in St Joseph, MO and the surrounding areas will not disappoint!
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