The home-buying process starts with the home, right? You know how it works: get on the internet, find your dream home, fall in love with it during a showing, and then figure out how to pay for it.
David Stein sees it happen all the time — and knows people have it backward. "You have to speak to a lender," says the Executive Vice President of Family First Funding in Mount Pleasant. "I know you love this house, but how bad would it be if we look at the house, and you want to put an offer in, but now you find out there's something on your credit that prohibits you from doing it? Or your income doesn't support what is necessary to qualify? You need to get your ducks in a row well ahead of time, while most people think about buying the house first."
The key to home-buying remains financing — finding out how much you can afford, what type of mortgage you qualify for, and what level of monthly payment you're comfortable with. That's why it benefits potential home-buyers to keep an eye on lending trends, such as these five that Stein expects will impact the market in 2019:
1. Home prices will continue to rise
For the 12-month span ending in February, the median home price in the Lowcountry increased 5.3 percent to $268,000, according to the Charleston Trident Association of Realtors. That’s representative of a nationwide trend.
"Demand is still high, inventory is still low. It’s still a seller's market," Stein says. "It's starting to even out a little bit. Now that interest rates have come back down, people are more positive. The weather is getting better, and they don't want to miss out on the low rates again."
2. Interest rates will inspire confidence
Those lower rates are a change from late 2018, when the Federal Reserve hinted at raises to come. But the Fed changed course in early 2019 — rates initially held steady, and by early March had dropped to a low not seen in over a year.
"Mortgage applications in February were the highest they've been in quite some time, and that has to do with rates coming down," Stein says. "As rates come down, more people can afford to buy a house. Consumer confidence increases. People are getting off the fence on whether or not to buy a house. And if they want to refinance, they can jump back into that pool, because most refinances are rate-sensitive."
Rates are now hovering from the low-4s to the low-5s, Stein says, depending on the borrower. "The overall picture that’s out there is very positive" he adds.
3. Buyers will have a wider variety of loan options
While the conventional, 30-year fixed mortgage remains the most popular option, there are a widening array of loan types that can fit many different borrowers. FHA loans are geared toward first-time homebuyers, and have a lower down payment. Some Fannie Mae and Freddie Mac programs require just 3 percent down with good credit.
"We're seeing a lot of first-time home buyers coming through our doors, and there are lots of options for them," Stein says. "There’s the misnomer out there that you need 20 percent to put down on a house, but you don't. There are a lot of programs from zero down to 3.5 percent down that they can qualify for."
For qualifying borrowers, VA and USDA loans requiring no money down are also available. Family First Funding can walk borrowers through options to find a manageable monthly payment, and even avenues for down payment assistance and credit repair. "We don't want to set anyone up to fail," Stein says.
4. Some lending standards will be relaxed
In the aftermath of the Great Recession, lenders tightened borrowing requirements. Those days are over, Stein says, with many lenders now loosening their lending standards and making home ownership a reality for more people.
That includes the self-employed, who struggled to qualify for mortgages in the wake of the market crash. "Programs now allow borrowers to use bank statements to qualify as their income if they're self-employed," Stein says. "These options have really opened up the market for self-employed borrowers."
5. Technology will reward the prepared
Thanks to filtered searches and automatic alerts, Realtors can know instantly when a new property meets their client's needs. That speeds up the buying process, rewarding those who have prepared ahead of time, and placing an emphasis on being pre-approved for a mortgage.
"People are getting that information so quickly, houses that are priced right and meeting the buyer's attributes are getting quick offers and multiple offers," Stein says. "I recently had one client who it took three houses to finally get one, and they were in on all of them right away. Technology has really sped up that process."
Documentation can now be emailed in PDF form, and Family First Funding has a mobile app that allows people to take photographs of the required documents. Speed is of the essence, especially in the entry-level market, which is why Stein urges buyers to seek mortgage approval before looking at homes.
"When that house you fall in love with comes up, if you're scrambling to figure out if you can do it, someone else is going to put an offer in and it's going to be gone," he says. "That's how quickly things are happening."
Interested in more information on the lending process, or help in determining what type of loan may be right for you? Family First Funding offers mortgage services to residential and business customers, and holds an A+ rating from the Better Business Bureau. Contact them at (855) 843-LOAN (5626), or online at MountPleasant.Fam1Fund.com. Family First Funding is licensed by the South Carolina Board of Financial Institutions NMLS #810371.