The current real estate marketplace is an environment where we have seen many offers for each home that sells. This means you need to have a competitive offer. One way of doing this is to have an underwriting approval at the time the offer is submitted.
This is something that mortgage brokers are very good at. Mortgage brokers will also have the capability to close loans much faster, on average than a direct lender. Mortgage brokers will be able to offer a lower interest rate on average than a direct lender, and they will be best positioned to find the lender that suits the exact needs of the borrower. This is due to the way wholesale lending works. Mortgage brokers can compare rates, turn times, and underwriting guidelines to get you the best package on the market for your scenario.
However, as interest rates rise, affordability goes down. If this continues it will start to limit the number of offers being submitted per real estate listing. If things continue long this path of rising interest rates, we will start to see more of a market where the buyers have control. Instead, the focus will be on getting the deals closed. This is one area where brokers have the opportunity to shine.
You will want to work with a broker so that you know which lenders will be able to get the deal done in today’s market. To start, mortgage brokers have access to lenders that only work with brokers. This gives you access to more programs, guidelines and features that a direct lender simply does not have access to. Doing business with a lender that only does wholesale is sometimes a VERY good idea because otherwise their ability to get things done may be diminished by downsizing issues. Due to rising interest rates, mortgage company revenues and margins are vanishing. Companies will need to cut cost due to excess overhead and what we are going to see is a lot of messiness in the form of cutting excess staff, changing guidelines, closing departments, mergers and acquisitions, etc.
The cutting of staff is a big one. Imagine, you are set to purchase a property. The loan officer or processor tells you, “Everything is fine.” Yet, after two weeks goes by, all of a sudden, they aren’t answering or returning your calls, and the person who spend all this time setting up your loan is gone…YUCK! This is what happens when companies cut staff in this type of rising rate environment. A good mortgage broker will have some insight in to which lenders are likely to close departments, cut staff, tighten guidelines, etc.
3-1-2022