Interest rates. These days, this topic is front and center among realtors, buyers, sellers, and of course, mortgage lenders. We have some essential information from Dave Pressel, a long-time Maplewood, NJ resident and a local mortgage lender who’s been in the biz for eons.
Dave has seen it all.
Below he shares some opinions, advice, and product information on home loans in the way that only Dave P. can – amusingly.
Lisa Danbrot: From your perspective, how have the recent interest rate upticks been affecting the numbers of homebuyers; are you seeing more people rush to obtain mortgages now that they realize they had better pull the trigger to secure a loan before they rise higher, or has there been a slowing of people applying for mortgages based on rising interest rates?
Dave Pressel: I get this question pretty often these days. There are three types of buyers. First, buyers who are upset that mortgage rates have gone up thinking they lost out on the opportunity for historically low rates. Secondly, buyers who realize that mortgage rates are still low, just not as low as they were a few months ago. And thirdly, buyers who are starting to look and realize that this is the current market and “it is what it is”.
I am still very busy doing preapprovals. I think the bigger frustration with homebuyers has not been interest rates, but getting outbid by wacky offers. I do see things starting to right-size themselves and hopefully, we will get back to normal soon (whatever normal is in our crazy industry).
LD: What are your predictions for the future of interest rates for home loans?
DP: If I had the answer to this, I could probably retire tomorrow. I have been in the mortgage industry for 33 years, and the one constant throughout that time is that no one has any idea where interest rates will go – not me, not the Fed, not the bond traders on Wall Street. Everyone can speculate; during this prolonged upward tick it is easy to think the sky is falling. But interest rates are still very attractive for buying real estate.
LD: I imagine lots of people might feel they understand the loan process, especially if they are not first-timers. But while people might think they know it all, they should probably follow your lead. So…
What is one important piece of advice you would offer to someone regarding home loans or the loan process? And what is one important piece of advice you would advise folks to avoid with regards to home loans or the loan process?
DP: It is really amazing how people somehow think 1/8% in interest rate is phenomenal if the interest rate goes down, yet it’s the end of the world if it goes up. And with the latter, it is usually my fault.
My main piece of advice, which is a constant with all buyers, is this: whatever your loan officer asks for, give it to them. There is a reason I ask for certain documentation, and contrary to public opinion, it is not to annoy you. Remember, when the loan gets securitized on Wall Street, the investor will look for the documentation we used to verify that the mortgage was approvable based on Fannie Mae / Freddie Mac / HUD / VA requirements. This can include pay stubs, W2’s tax returns, bank statements, divorce decrees, etc.
As far as what to avoid, under no circumstances should you mess with your credit from the time you apply for your mortgage through closing. Do not close any accounts. Do not open up a new Target credit card because they offered you 20% off on your $100 purchase. It will cause aggravation for everyone (including the borrower) and can affect the credit score adversely.
LD: What are some of your favorite loan products out there?
DP: This is an interesting question, and definitely not a “one size fits all” answer. If a borrower knows they are only buying a house for a five to seven-year timeframe and will not keep it as a rental when they move, there is no reason to do a fixed-rate mortgage. Maybe do a seven-year or 10-year Adjustable Rate Mortgage (ARM). ARMs typically have the same 30-year amortization, but the interest rate will be lower since it is not fixed through the life of the mortgage. But the risk is that if you stay there past the initial fixed-rate period and you have not refinanced during that time, then you run the risk of rates going up. But I find that the 10-year ARM has helped soften the blow a little bit with regard to the higher rates over the past few months.
Another great product out there is FHA. I know, I know. Realtors hate the F word, but in reality, it is one of the most accommodating products for homebuyers looking to minimize their costs. Here in NJ, you can buy a $1 million home with a 3.5% downpayment AND the seller paying closing costs. I just had one close a few weeks ago, and if it was not for FHA there was no shot this buyer would have been able to purchase the home.
The biggest rumor about FHA is that it is “more restrictive of a product for home sellers to worry about.” While there are a few additional hoops to jump through, it really is very straightforward. I have done literally hundreds of FHA loans during my career, and it is just like a conventional mortgage as long as the person/company doing the mortgage knows what they are doing. Here’s a closing concessions comparison:
CONVENTIONAL 5% DOWNPAYMENT = MAX OF 3% OF PURCHASE PRICE FOR CLOSING COSTS
FHA 3.5% DOWNPAYMENT = MAX OF 6% OF PURCHASE PRICE FOR CLOSING COSTS
And there you have it!
For more info on rates and the loan process, or to obtain a preapproval, you can contact Dave.
📍 51 Salter Place, Maplewood, NJ 07040
✍🏼 APPLY ONLINE: https://myloan.bsmfunding.com/dr/c/degfl