July 12, 2021

This paid piece is sponsored by Central Bank.

The housing market is as competitive as ever, so make sure you’re putting yourself in the best position by honing in on your mortgage strategy.

We turned to the experts – the mortgage team of Michael Gustafson, JoAnn Linn and Peter Jenkins at Central Bank – who tackled some big questions commonly asked by house hunters and shared their advice on navigating today’s lending environment.

JoAnn Linn and Peter Jenkins

If I am in the market for a home, what should I expect when it comes to getting pre-qualified? What’s the turnaround time like? What kind of information should I be prepared to bring?

Getting pre-qualified is an important step towards home ownership. In our highly competitive market, many homes are seeing multiple same-day offers. Having a pre-qualification letter issued by your lender is crucial when you make your offer. Turnaround is fairly quick given the information provided with the application. The more complete your information is, the faster your lender will be able to analyze it and issue you a pre-qualified letter. — JoAnn Linn, NMLS ID #1254154

Expect questions like, “What do you want for a monthly budget on your home?” and “Where is your down payment coming from?” If you have nontraditional sources for a down payment, be ready to share. Seasoned funds in a bank account are preferred. It’s best not to leave your down payment in stocks or other investments that can suddenly drop and affect your ability to finance a home. Funds in a business account should also be put into personal accounts as well. Preparations done ahead of time will help your purchase go smoothly. — Peter Jenkins, NMLS ID #1136071

What are you hearing about rates? How long can I expect them to stay like this?

With COVID vaccines widely distributed and the release of restrictions, there is hope that our economy is on a positive path to bounce back. That has resulted in a slight climb in rates since January. They have leveled off for the time being. Although it’s hard to know for sure, it would be surprising if they didn’t increase, as historically you won’t see these low rates trending much longer. – Mike Gustafson, NMLS ID #248816

Current rates are a big reason the market is so strong right now! Most people are guessing rates won’t stay this low in the long run. We have a saying, “If you like it, lock it.” — Peter Jenkins

How might I decide whether a 15-year, 30-year or another type of rate might be the right fit for me?

Mike Gustafson

Everyone’s situation is different, depending on personal goals and qualification ratios. There are many factors to consider. The rate: 15-year rates are typically lower. The payment: Do you prefer a lower payment? If yes, a 30-year term would be a better fit. You have the flexibility to pay down your mortgage without pre-payment penalties. Some homebuyers choose a 30-year mortgage with the lower payment to give themselves the option to invest more of their money. Perhaps your retirement is on the horizon and want your mortgage paid off sooner; a 15-year mortgage might be a better option for you. Consult with your lender to discuss which option is best for you. – Mike Gustafson

If I’m a new buyer who doesn’t have much for a down payment, has never owned a home before and does not have stellar credit, is there anything out there for me?

Most likely, yes! We have a wide variety of loan programs that we review with you during our initial conversation. Some programs, like Rural Development and VA, allow for 100 percent financing as long as you meet their eligibility requirements. If you don’t qualify for either of those, don’t count yourself out! We have access to programs with as low as 3 percent down and down payment assistance that we can help guide you through. These down payment and closing cost assistance programs can help bridge the gap with your down payment and closing cost needs. We can also advise on seller concession caps and gift funds, depending on the program route you go. We have information on HUD-approved agencies in our local market that offer free home ownership counseling services. These are available for you to complete on your own ahead of time or as a requirement of your loan to prepare for home ownership. There really are so many different options out there, so finding a lender who can navigate through those decisions with you is key. — JoAnn Linn

What about jumbo mortgages? Are they still a “thing?”

Yes, they certainly are. Nonconforming or “jumbo” mortgages, a loan amount over $548,250, were a tough market to tap into in early 2020. Many lenders, though, have secured secondary market investors as an outlet for offering this product. Consult your lender on the additional guidelines these jumbo loans will require. Depending on the investor, these borrowers will have to provide evidence of reserve accounts anywhere from 12 to 30 months to cover principal, interest, taxes and insurance, along with other qualifying ratios and FICO scores. — JoAnn Linn

Jumbo loans in some cases can be more competitive than “conventional financing” as far as interest rates are concerned. However, they do require your traditional 20 percent or more down. If customers have loan needs over $548,250, they also have an option of doing a first mortgage up to $548,250 and a second loan simultaneously. This makes sense if a customer is selling another home and will have a large principal payment in the short term. — Peter Jenkins

Central Bank maintains the servicing of the majority of loans it originates, but why does that matter to me as a client?

At Central Bank, we keep the servicing of our conforming conventional and Rural Development loans. In-house servicing enables our clients to maintain a relationship with their lender well beyond the closing. We’re available for payments, escrow or general loan questions customers may have for the life of the loan. We pride ourselves on our customer service and small community bank experience we can give our clients. — JoAnn Linn

One of the biggest reasons customers like keeping servicing with their lender is everything can be done on the day of signing. Online access and automatic payments are set up on day one for customers who choose Central Bank. With loans where servicing is sold, they have to wait to set up payments, and sometimes that can change multiple times during their loan, which can be frustrating. – Mike Gustafson

I’m considering buying a second home. Is there anything different I should know about my mortgage options?

Although there are not as many loan products available for second homes, there is still availability. Second homes often have the same financial underwriting requirements as a primary residence, just be prepared to provide information on your existing home to support the financing of an additional mortgage. Make sure to consult with your lender on the location and intended use of the property as well. — JoAnn Linn

It’s important to be open and upfront on whether or not your second home will be rented when you’re not utilizing it. That may cause snags in the lending process if it’s not discussed upfront. — Peter Jenkins

And how about refinancing? Are you still doing many of those? Might it still make sense for some people?

We continue to see a fair amount of home refinances. Record low rates in 2020 led to a high influx of these requests, and it was unlike anything the industry has experienced before! Not everyone refinances just for the rate. While rates have gone up with the turn into 2021, we still receive calls from homeowners who didn’t have the opportunity to refinance in 2020. Along with this, we have homeowners that have experienced other personal circumstances that might lead to a need for a refinance: cash-out, divorce, etc. Whatever the case may be, it’s worth a call to your lender to at least inquire and see if refinancing makes sense for you. – Mike Gustafson

Finding a lender who will talk through your home ownership questions and listen to your needs is a great first step to lock in your lending approach!

Ready to get started with your next home loan? Reach out to the Central Bank team at 605-782-1798.