Simon Tahan, SVP, Director of Home Loans, Webster Bank
Is this the year you plan on buying a new home? Across our region, the market continues to be tight: Lots of competition for a small inventory of available homes and a housing stock that is older and usually in need of updating. Whether you’re looking for a ten-room manor in Fairfield County or a first-time, fixer-upper in Providence, you may have to be prepared to move quickly. As interest rates are poised to keep rising, Webster offers some perspective for your planning.
Your tax picture may give you new momentum.
One important factor may give you additional momentum: the first impact of the 2017 Tax Cuts and Jobs Act. In 2019 consumers, by and large, may see new tax savings they can use towards a down payment.
Bear in mind, however, that the new law may cap the standard mortgage interest deduction at $10,000. So whether buying or selling, consumers should consult their tax advisors before making a decision so significant.
You’ll probably look for mortgages online—but don’t stop there.
The web is a good place to start, but if you stop there, you could be missing substantial opportunities. It’s important to work with a lender who understands the community/market you want to buy in, as well as your complete financial picture. This can offer opportunities you can’t find online, and a tighter fix on the true cost of your decision.
While online (“fintech”) lenders may offer fast loans, reduced cycle times and competitive rates, buyers should remember that the figure you see online may not reflect the whole picture. Those “lower” costs often don’t factor in expenses that can drive up your real exposure: fees, flood insurance, and other costs specific to the property you want to buy. Before making a commitment, it may be helpful to speak with a local mortgage lender who will take the time to understand your unique situation and provide a more holistic view, based on their knowledge of the local environment.
Mortgages today have great options you may not know about.
If it’s been a while since you last bought or sold a home, or if you’re a first-time buyer, things have changed in the marketplace. For example, too many people postpone their plans because they think they need to put 20 percent down.
That’s no longer the case: Many state and municipal governments provide programs with new flexibility for first-time buyers—even letting you put as little as 3 percent down. However, loans with lower down payments usually require you to buy Private Mortgage Insurance (PMI)—another reason to take a look at all your obligations with a specialist.
A local lender knowledgeable of the local real estate market, works closely with realtors and builders, can help answer your questions through every step in the process—even after you’ve crossed that brand-new threshold. What’s more, many traditional banks have ramped up technology to compete with the speed of the fintechs. What’s really important to remember is that local banks provide a service that often fintechs can’t: an in-depth, specific look at your plans and options.
Millennials may have special considerations.
Will Millennials move the home-buying needle significantly? Rents are rising, another factor making homeownership a more realistic option. However, so are interest rates, which may discourage them. Many Millennials continue to be burdened by unprecedented student debt—one big reason that lenders often balk at giving them a mortgage. Young people may also feel that their credit history isn’t strong enough to get mortgage approval.
The right guidance can help. Millennials may be able to refinance their student loans at a favorable rate, even though rates for other types of loans are rising. Once they have graduated and begun careers, lenders see them as a better risk and may offer better student loan rates.
Likewise, lenders today often take into account non-traditional credit sources—utility payments, rent and cell phone bills, for example. So a lower conventional credit score may not be the barrier it seems. Once again, it’s important to talk with a lender who looks at your whole financial picture: how all your goals and obligations affect each other. You may be closer to a home than you believe.
Education is key.
Before you begin your search for new digs, dig into the latest information. Take a home-buyer’s education class—they’re usually free or at minimal cost. You can find a local class here. If knowledge is power, you need all the power you can get to make a savvy move in the housing market today. As always, Webster Bank stands ready to assist—especially as you make one of the biggest purchases of your life, that wonderful new home. For more practical home-buying insights from Webster, check out this blog post.
The opinions and views in this blog post are those of the authors, and are not intended to provide specific advice or recommendations for any individual. Please consult your tax advisor regarding your individual situation. All loans and lines of credit are subject to credit approval. The Webster symbol is a registered trademark in the U.S. Webster Bank, N.A. Member FDIC.
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