In the market for a new home? You should know that there’s been gradual changes over the years in lending and mortgaging, and if you haven’t kept up, the experience might well be unlike any home purchase you’ve made before.
Among the biggest changes of late is the entry of more people in the home-buying market, making it more likely that if you don’t act fast, that quaint three-bedroom, two-bath cottage you have your eye on could be gone before you score your pre-approval letter.
“Rental prices are really high,” said Matthew Krimm, regional business development manager at Mlend, which finances homes for residential buyers, “so you’re seeing people who maybe before would have been renting, are in the market to buy because they can buy a house less than they can rent one for.”
In many areas around Baltimore, there’s an imbalance between who’s buying and what’s available.
“There are more buyers out there right now than there are properties,” Krimm said, “so the properties that are out there are going very quickly.”
“Even though the economy in and of itself is still struggling,” he continued, “the outside of that is you have people who went through a bankruptcy or foreclosure three, four years ago and are back into the buyer pool. So boomerang buyers—people who had a financial hardship years ago—are back in a position to buy. Interest rates are lower, that makes it more affordable to buy.”
Another point to keep in mind: If you’re expecting the traditional process of filling out paperwork by hand, you’re likely in for a surprise. Much of the home-buying experience has shifted online; the paperwork isn’t even paper anymore.
“When I first started, the loan package was a big pile of pages and you sat down at the kitchen table and signed everything,” he said. “Now, 95 percent of customers do that online. Back even 10 years ago if you thought about buying a house, you call the realtor your mom used and they tell you what lender to use. Now it’s social media.”
Robert Altieri, executive vice president and president of the mortgage division at Howard Bank, has also noticed the change in online activity.
“You have not necessarily new mortgage business popping up, but you have more internet applications,” he said. “I think you’re seeing 57 percent of mortgages done through an electronic means.”
While Howard Bank, which does roughly 250 mortgages monthly per Altieri’s estimation, does not use an online process for mortgages right now, Altieri said they hope to by the end of their third quarter.
The changes he’s seen in mortgages have been more gradual, but they are certainly there.
“It seems like, since we’ve been through the Great Recession, the secondary market investors are loosening their guidelines a little bit to assist, obviously, homeowners,” he said. “That’s been a bit of a change, but a very gradual change. As the economy gets better so do the parameters and underwriting guidelines from investors.”
There have even been shifts for hard money lenders, like Craig Fuhr at Dominion Lending, which does commercial loans for real estate investors. To put it in HGTV-speak, it’s like a Tarek and Christina situation: flipping houses.
After the mortgage meltdown starting back in 2007, hedge funds started dipping into the real estate world and backing lending companies, like Dominion Lending. This gives them a much larger amount of lendable money—and more competition.
“Business went from being very small local mom and pop where a lender typically had a couple million dollars to lend to now unlimited,” Fuhr said. “So the benefit here is there’s a lot of competition now. The market has created competition, which is great for real estate investors because now we’re competing with much more sophisticated and large companies for large business.”
But one thing that hasn’t changed: Who do you call first when you’re looking to buy a home?
“The first call someone should be making is to a lender,” Krimm said. When it comes to calling a lender and learning where you stand financially, no matter if you’re looking to move in two weeks, two months or two years, “the time to start is now.”