July 28, 2022

This paid piece is sponsored by Central Bank.

The days of a 3.5 percent or 4 percent mortgage rate don’t need to be over – if you work with this lender and the approach makes sense for you.

Central Bank, which has three locations in Sioux Falls, increasingly is finding customers are able to secure those low rates by taking advantage of adjustable rate mortgages, or ARMs.

Of course, they’re not for every situation. But in many cases, they make sense and can continue to help you keep your financing costs down despite rising rates.

We caught up with Jeff Richter, executive vice president and mortgage loan manager, NMLS ID #493725, to learn more about how Central Bank is helping homeowners navigate this changing environment.

We realize the market is constantly changing, but what’s the current situation? What are you experiencing in terms of rates?

Shortly after the first of the year, we saw fixed rates climbing significantly ahead of what everyone anticipated. The market cooled down in the beginning, but we countered with some very aggressive adjustable rate mortgage products. Once we launched those, we saw a big lift to our production, so we’ve seen a steady flow into those products.

What kinds of adjustable rate products does Central offer, and what do the rates look like?

Right now, we’re able to offer three-, five- and seven-year ARMs in the 3 percents and a 10-year in the low 4 percents. That gives a lot of people comfort. The hope is, historically, we see rates cycle every so many years. So homebuyers need to make sure they’re staying in contact with their lender to find out if it’s sensible to make the move and then potentially refinance down the road as needed.

Who is a good fit for an adjustable rate?

It all depends on your situation and your tolerance for risk, but many people are a good fit, including first-time homebuyers and those who are building their homes. Essentially, you’re figuring that rates will go down by the time the term of your ARM is up, or in certain cases you might have even paid off your mortgage. As a first-time homebuyer, I would be open to an ARM because your chances of staying in the home seven to 10 years might not be very strong. It’s just important to be working with an experienced mortgage professional who knows the ins and outs of the product and can walk through your financial situation with you.

What happens if rates go up significantly at the end of your ARM?

You still have some protection there. There is a cap for how much your rate can go up that first year after your initial fixed ARM period is done and every year after that. With Central Bank, it’s 2 percentage points. So if you had a five-year ARM at 3.5 percent, worst case, after five years, you’d adjust to 5.5 percent.

How about qualifying for a mortgage? Are you seeing any new challenges with that?

We really haven’t seen any tightening from a credit quality standpoint, and we haven’t seen many issues with qualification. Unemployment is low, and the housing market is strong. From an income standpoint, it seems buyers are doing all right. Many are coming in with equity from their existing home sale, and that is providing a good source for a down payment. We also have products for first-time homebuyers with little to no down payment. Appraisals are also becoming less of a challenge as we are seeing significantly fewer offers coming in above asking price than we were seeing 60 to 90 days ago.

Are ARMs also a good fit for a jumbo mortgage, second home or investment property?

All of the above. We’re seeing more and more second homes and purchasing of second homes all over the country – everything from western South Dakota to Florida and Texas and all points in between. Some of that is meant to be an Airbnb as well, so that’s something our loan officers vet in the early stages in terms of your intentions with the property.

Any final thoughts for homebuyers?

I would just reinforce the importance of working with an experienced originator, especially when it comes to today’s market and some products you might not be as familiar with. Our team has decades of experience, and our lenders in Sioux Falls do a fantastic job. Reach out to any one of us, and we’ll work with you to meet your needs in any interest rate environment.

Ready to connect with Central Bank’s experienced team of mortgage lenders? Call or email Adam, Peter or JoAnn:

• Adam Cooper, NMLS ID #1963175, 605-977-7500 or [email protected]
• Peter Jenkins, NMLS ID #1136071, 605-977-7500 or [email protected]
• JoAnn Linn, NMLS ID #254154, 605- 782-1745 or [email protected]

Central Bank, NMLS ID #447201