Interviewer: Let’s start with inflation. What do you think about the current state of things, how it will play out in the real estate and mortgage world and most importantly, what does the impact look like for the lower income bracket?
Justin: Well, I just wanted to say, thank you for having me. Coming from a lower income background myself, growing up on welfare and living in housing projects, believe me when I say that I have a deep emotional commitment to the cause and American Dream of home ownership. Unfortunately, it appears that almost every decision being made is giving the lower 90% the shaft, and there doesn’t appear to be an easy way out.
Interviewer: Can you elaborate?
Justin: Inflation is an obvious problem because when the cost for goods from everything from bread to real estate goes up, wages don’t seem to follow in kind, at least not immediately. If real estate prices increase it means a higher monthly payment for everyone buying and likely renting as well. The “go to” tool for curbing inflation is raising interest rates. When interest rates go up, monthly mortgage payments go up as well. When monthly expenses go up, affordability and buying power goes down. Budgets get thinner and dinner table conversations become more tense.
Interviewer: Can you give us an example?
Justin: Quite frankly, the bar is raising every day. Let’s say you make $100,000 per year, which should be considered a really good income. However, in California for example, if a home is worth $2,000,000 and goes up by 10% that means you effectively lost a lot of ground year over year. The work from home thing should help with this in the long run if the trend continues because it allows people working in many high paying jobs to move to a less competitive area.
Interviewer: What else might be pushing the price of real estate?
Justin: Think of it this way, there are roughly 20,000,000 millionaires in the United States. If you’ve got an extra million or two that you feel you need to park in real estate, you want to lower the cost of parking the money. This means we will almost always see a larger flood of wealth into real estate for states that limit property tax increases, California being a prime example. This is a very good and attractive thing if you are an owner in one of those states so I’m not bad mouthing it. I am just explaining one other mechanical, driving force.
Interviewer: I am hearing chatter about big companies buying thousands of single-family homes. What do you think about that?
Justin: Well, it’s great for Real Estate Agents. The homes sell for usually all cash and they don’t need to worry about loan contingencies. I got to say though, my gut is telling me something is maybe morally wrong. Let’s think about this for a second, should big companies really be allowed to buy up so many single-family houses?
Interviewer: What are you suggesting here, government intervention?
Justin: Let me put it this way…if these companies are given a competitive advantage due to government contracts, subsidies, or strategic information, it means they can run a loss in other areas and still exist. They have effectively already become an extension of government that props up housing prices. Any time you tweak market forces there will be consequences. In this case it means directly competing against real world, hard-working Americans. If you have to bid up the price by $40,000 to outbid what is essentially an extension of government paying all cash, that means a full year’s worth of income for many, many people. After you factor in taxes and expenses, it could mean ten years dispensable income for some people. It’s not peanuts.
Interviewer: What about the underserved area of self-employed borrowers looking to purchase investment properties? Is there anything that can be done to make it easier for them to qualify, or at least speed up the process?
Justin: I’m glad you brought that up. If you are interested in purchasing a property for investment, especially if you are self-employed, the traditional mortgage products often don’t cut it. Documentation requirements can slow things down and, especially in this market, that can lead to either requiring a higher bid, or passing on the deal. Products such as DSCR or Debt Service Coverage Ratio, programs such as asset depletion or bank statement programs use other methods to qualify and can sometimes be the right fit. Most of these programs are only for investment properties, I would love to see more non-traditional financing options hit the market for primary residences.
Interviewer: What do you have to say to first time home buyers, or people underserved in this market that want to purchase a home, but don’t know where to get started?
Justin: We are in the trenches here with you, but remember, there’s only so much we can do. We are bound to the guidelines and underwriting of the big lenders, the difference with us however is we can at least pit them all against each other to get the best scenario possible to meet your goals. Whether that means the lowest rate on the market, fast approvals, fast turn times, the reliable servicing, or best all around. Each one has their own strengths and weaknesses. We will find THE lender that is best in the area you care about most and at the same time you can take advantage of our wholesale pricing. If you want your home purchase offer, with a home purchase mortgage to be competitive, I would suggest giving us a call and asking about our access to early underwriter approvals. If you submit an offer with an underwriting approval, it carries more weight and makes the offer MUCH more attractive to the seller.
That being said, I don’t want you people to worry about the details, let us do that. Just give us a call, or fill out our painless online web form at www.makewaymortgage.com and we will reach out ASAP and do our best to MakeWay for your home ownership dreams.
