As a Licensed Mortgage Loan Officer - I have been fortunate enough to help new clients and past clients better position themselves with their current mortgage. As rates trend higher, I know they will look back and be extremely happy with their current position. Additionally, I have seen and heard from many clients that are ready to sell their current homes and move on to "bigger and better" things as their families grow. With all of this information in mind, it helps to begin preparing for 2014.
As the consumer, what can one expect:
- Increasing Interest Rates - sure, everyone would love to keep rates at these historic all time lows, but the longer they remain at these levels, the more it shows the economy is still stagnant. A growing economy should be seen as a positive because we are in a lot better position in 2014 then we were in 2008. Look for rates to continue to rise and most likely by the end of 2014 in the upper 5% range.
- QM and Ability to Repay - This will impact some sectors of the overall mortgage market. The main point to consider is that we have been working under most of these rules for the last several years. Low DTI, strong Credit score and more down payment will always make for a safer client and overall risk when buying a home. In a perfect world all homes would be bought with 20% or more down and they would be set to be paid off within 5-7 years. In the recent ERA of 30 YR Loans - nobody remembers when homes were bought and if anything was financed it was paid off within 5 years or restructured. Only since the mid-30's (after the Great Depression) did these mortgages come to be. So, what do we do with QM and Ability to Repay - we qualify clients with the peace of mind that they can actually afford to buy the home they are living in. Look, will there be some clients that are impacted...sure the jumbo Interest Only loans won't exist and excessive credit risk will be scrutinized - but homes will still sell and people will still want to own their own home.
- Balanced Housing Market - For the first time in years, the market may have some balance. That will mean accurately priced homes and a balanced amount of buyers and sellers. Short sales and foreclosures will continue to stay flat, like they were this year, and less investors will be looking to get "deals". All of this means, that there will be "normal" sales (if there is such a thing) with hopefully happier clients.