Low rates, new programs assist homebuyers
With home sales off to a strong start this year, it may be a banner year for the mortgage industry.
People make New Year's resolutions to buy a home, and then it takes a while for them to get working on it, become preapproved and start buying, said Evan Geiselhart, CEO of HomeTrust Mortgage Corp.
"Last week it was as though a switch was flipped," Geiselhart said recently. "Applications just boomed for home purchases and refinancing existing homes. That's good news for homebuilders and mortgages. The longer the rates stay low, the better it is for every homebuyer."
Chris Kinsella, senior mortgage banker at United Home Loans, agrees.
"It's been very busy here the last couple of weeks. Low rates have been positive for people who want to buy a home, and this is a great time for them to make a purchase."
For homebuyers seeking a mortgage, this may be known as the year that is making the loan process easier for them.
There are a number of programs for first-time buyers and people who want to purchase a home with a minimum down payment, said Bob Shield, executive vice president for Wintrust Mortgage.
"FHA offers a minimum of 3.5 percent down (mortgage). The VA still offers (a mortgage with) no money down. Fannie Mae and Freddie Mac have new high-ratio loans available, and they both allow for a minimum down payment of 3 percent. And we're the No. 1 lender for the Illinois Housing Development Authority loans (IHDA program)."
Jason Accola, senior mortgage consultant at Wintrust Mortgage, says it's a common misnomer that people need a large down payment to buy. "You don't need 20 percent down to purchase a home. Special financing up to 105 percent is available throughout the state of Illinois."
Accola works closely with Realtors and builders to offer special financing for buyers, including tax incentives, closing costs and down payment assistance.
Although he works with all types of buyers and properties, from starter to luxury homes, he also specializes in helping first-time buyers take advantage of some of the best financing programs available in the marketplace. (Note: A first-time buyer is someone who has not had a financial interest in a primary residence within the past three years.)
TRID
The "Know Before You Owe" rule, commonly referred to as TRID, helps consumers understand the terms of their home loan before they sign on the dotted line. They can see closing numbers before closing, and they have a certain number of days to receive the disclosures.
Proper Title LLC, a full-service title insurance agency, had a phenomenal February with orders and closings stronger than last year, said Ben Niernberg, vice president of business development and operations for the Northbrook-based company.
"The mild winter has helped stabilize rates, and time has passed with the TRID regulations," he said.
The law, which went into effect last October, has had a large impact on the mortgage industry. Although its intent was to provide safeguards for buyers, it created a longer process, required more documentation and resulted in time delays in closing transactions.
"There is still a lot of confusion with some lenders as to what the government intended with this new legislation. I do see a lessening or relaxing about some of the program guidelines, but it's a cumbersome process with all the steps involved to make sure that we're making safe loans to consumers."
Some of the increase in existing home sales from a year ago can be attributed to postponed closings caused by the implementation of TRID, he said. However, with the spring market underway, the industry is expected to be acclimated to the new procedures.
"Consumers are buying, and we see a very strong market. As a title company, we like that," Niernberg said. "The biggest issue is that inventory is not enough. We're paying close attention to inventory in all sectors of the market. We need inventory or sales will get stagnant. We're also looking to see where the rental market goes."
Interest rate lock
When a new homebuyer signs a contract to have a home built, it won't be ready until some future date. This gives the buyer concern about what the interest rate will be in nine months when the home is complete.
HomeTrust Mortgage Corp. offers buyers of new construction a rate lock where they have up to a one year rate lock, and buyers really like that option because they can sleep better at night knowing their interest rate is locked, Geiselhart said.
"We do quite a bit of business with Airhart Construction because we have a long-term rate lock, and we close on time, and these factors are very important to new-home builders.
"Just now underwriting rules are lightening up, and that will make it easier for people to qualify for a mortgage. Many people are getting a 15-year fixed mortgage because it might be their second or third home, and they are in a position to pay their mortgage off in 15 years. Buyers want a fixed-rate mortgage."
Mortgage options at Wintrust Mortgage
First Home Illinois program
• Available in select Illinois counties
• Affordable 30-year fixed rates
• $7,500 down payment and closing cost assistance
• Minimum borrower contribution of only 1 percent of purchase price
@ Home Illinois program
• Available throughout Illinois
• Affordable 30-year fixed rates
• $5,000 down payment and closing cost assistance
• Optional Mortgage Credit Certificate (MCC), whereby 20 percent of the annual mortgage interest paid becomes an annual income tax credit up to $2,000 per year.
• Minimum borrower contribution of only 1 percent of the purchase price
• This program is also available for non first-time buyers, but they are not eligible to receive the MCC.
City of Chicago TaxSmart program
• Available only in the city of Chicago
• Mortgage Credit Certificate Program, whereby 20 percent of the annual mortgage interest paid becomes an annual income tax credit up to $2,000 per year.
Accola was named the No. 1 originator of these programs in Illinois by the Illinois Housing Development Authority consecutively in 2012, 2013, 2014 and 2015. He is one of the Chicago area's leading experts on home loan renovation and construction-to-permanent financing. Homebuyers can purchase or refinance a home and finance in renovation costs within one simple loan, he said.