By Joe Gladden, Veteran Realty Serving America’s Military, Inc. and Susan Wallace, Senior Loan Officer Access National Bank
This the first article in a series regarding “Smart Home Purchasing.” Purchasing a home is a major financial decision and deserves a smart strategy, reliable team, thoughtful planning, the best available intelligence, and good tactics. These precepts should sound very familiar to military officers.
Before we start, we want to offer some insight on the financial environment. For the preceding six years, mortgage interest rates have been at unprecedented lows. Through the Fed’s “quantitative easing bond buying program,” interest rates have been kept artificially low in an attempt to stimulate the economy, in large part through the housing sector. No one has predicted that rates would have stayed so low for so long.
The bond buying program was recently terminated based on economic recovery. And, in a speech in Paris on November 7, 2014, with the expressed intent to mitigate financial markets volatility in advance, Fed Chairwoman Yellen announced the intent to raise the prime interest rate “sometime in 2015.”
Based on this we believe that home mortgage rates will finally increase in 2015 and that this is important “intelligence” for those considering a home purchase or refinance.
Planning and Preparation for a Smart Home Purchase
Build Your Team
When assembling your team to purchase a home, the single most important decision you will make is choosing the right lender early in the process. This may come as a surprise from a Realtor® so we will explain our thoughts on this. While the loan qualification and processing have always been tedious and time consuming, since the “housing market collapse,” it has been become more so by a factor of 10. The Dodd/Frank Act, intended to prevent bad lending practices, seriously complicated the process even for folks with high incomes, low debt, and credit scores north of the 800 mark. It placed the onus directly on the lending institutions, specifically the underwriters, and this equates to mountains of verification.
Why is the loan officer/lender so critical? When loans are not approved in time for the contractual settlement date, or if they are declined late in the process, the purchaser may be found in default which can potentially result in forfeiture of the escrow or suit for specific performance of the contract.
From our experience, the best (least painful) loan experiences occur when a highly knowledgeable, experienced loan officer is engaged throughout the process to settlement. The loan officer may use a processor, but must stay personally involved and accountable through every single step. It should be the same loan officer, not just the one who answers the 800 number, and they must be highly accessible for timely communications. Unfortunately, in some of the better known lending institutions, the loan officer (experience level and knowledge unknown) takes the loan information by phone. The file is handed off to a processor and accountability tends to dissipate. When interviewing lenders, compare interest rates, terms, and fees, but insist on service and accountability by the loan officer throughout the process. If this can’t be assured, then move on to the next company.
Realtors® love to trumpet their sales volume as proof of experience and success. Okay, it’s an interesting data point but it doesn’t follow that the highest volume agent is going to provide you the best possible service. An argument can certainly be made that the highest volume agents may be too busy to provide highly personalized service. In many cases, high sales volume is due to “teaming” rather than actual personal sales and you may sign up with an agent to find that you are handed off to one of their team members at different times for different phases of the process.
Referrals from happy clients and references are the best qualifier of agents.
Like the loan officer, personalized service with excellent communications is the key to a good experience.
Highly professional Realtors don’t “sell you a house.” Rather, they facilitate a very complex (and growing more so) process that helps you find the home you want and then navigates you through the contract process and settlement. They are process oriented, highly organized, and always prepared. In the military we quickly learn never to brief the boss without a ton of preparation. You should expect your Realtor to be prepared for every meeting and home tour. They need to be thinking several steps ahead in the contract process and negotiations. They need to know the market and be prepared to defend their contract offer/counteroffer recommendations on pricing and terms. Accessibility and strong communication skills are a must.
Today, the technology factor is critical, and they should be on top of the ever changing technology curve. Listings links that meet your criteria, complete with digital photography and video tours, can now be automatically sent to your email; contracts and all forms can be completed, scan/emailed, and even signed electronically. Facetime and skype can be very powerful tools in interviewing loan officers and Realtors® a continent away. A purchaser living in Germany can complete their house hunting trip in the DC region, return to Germany, and complete the process easily almost anywhere on the planet.
A sidebar regarding technology. Many purchasers start their searched on their own through powerful online sites such as realtor.com, Zillow, or Trulia. These can be extremely valuable tools, but it is important to understand their limitations which will be addressed in our next post.
A final comment on building your team. Start the process as soon as you think you may be moving to a specific area. Six months out is not too early to interview and screen lenders and Realtors®. And starting the loan qualification process, reviewing listings, early will enhance an informed decision and reduce stress.
We hope this is helpful and that you will tune in for the next article on Finding the Right House to Call Home.