PEOPLE
Sheri McKim is a mortgage lender and branch manager with Benchmark Mortgage in Cedar Park. She recently answered several questions for Community Impact Newspaper about the homebuying process, including about how rising interest rates will a ect buyers. The following answers have been edited for length and clarity. Sheri McKim COMPILED BY CLAIRE SHOOP
LOAN TYPES
WHAT ROLE DOES A LENDER PLAY IN THE HOMEBUYING PROCESS? The mortgage lender is going to look at the buyer’s situation, credit pro le, income, all of that, and nd the best loan that ts their needs. A loan o cer will be there before they nd a contract, so that way they know how much they qualify for. Then, once the contract comes in, the loan o cer walks through the whole process—through underwrit- ing and closing and everything, all the way to the end. WHO IS APPLYING FOR MORTGAGE LOANS NOW? IS IT MOSTLY FIRST TIME BUYERS OR PEOPLE WHO HAVE PREVI OUSLY OWNED A HOME? I have a lot of rst-time home- buyers, and they’re having a hard time being comfortable with the way prices have gone up so quickly. So, the people that are actually getting the houses and getting contracts accepted would be the people who have owned before, the more seasoned buyers. First-time home- buyers are de nitely struggling in this market. WHAT ASSISTANCE PRO GRAMS ARE AVAILABLE TO FIRST TIME HOMEBUYERS? Right now [down payment assis- tance programs] are very limited. It used to be you could get [assistance with] 3%, 4% or 5%, and that’s of the loan amount to go toward down payment and closing costs. But right now, they’ve added a 2% and gotten rid of the 5% and most of the time it’s hard to even get 4%, so it’s really just 2% and 3% is all that’s available because the market is so volatile. Sometimes there’s stipulations to these programs, so it’s money they don’t need at closing, but they might have to pay it back depending on how long they’re in the house. Then, there’s one that’s a pure grant. It just depends on the program.
HOW IS THE FEDERAL RESERVE INCREASING INTER EST RATES AFFECTING HOME LOANS? It’s a ecting rst-time homebuy- ers for sure. You may have someone that maybe even last year could have quali ed in Cedar Park may have to go all the way to Hutto or way out to just nd something in their price range because the interest rates end up making payments higher. I’ve had a few buyers where they were looking in December and hadn’t found anything, but now the payment for the same house—just because of the interest rate—has gone up $400-$500. WHAT WILL BE THE NEAR TERM EFFECT OF RISING INTEREST RATES? I would imagine—and we are already starting to see it—the values are going to start to stabilize. We’re not going to have as many people bidding on all the houses, so they are going to start to level o . We’ve seen value increases across the board in the Austin area for the past year and a half. I’ve been in the business for over 20 years, and I’ve never seen tax values do what they did this year. At a minimum, all of the houses have gone up $100,000 in tax value. I don’t think [prices] are going to go down because businesses are moving to Texas; I just think they’ll start leveling out. WHAT IS THE DIFFERENCE BETWEEN AN ADJUSTABLE MORTGAGE AND A FIXED RATE MORTGAGE? A xed-rate mortgage is going to stay the same. The rate stays the same for the entirety of the mortgage to where an adjustable rate mortgage will uctuate up or down based o of the index that it’s tied to. There [are] di erent indexes that the [adjustable rate mortgage] could be tied to. So there’s something called a 5/1 ARM, so what that means
is that it’s xed for ve years, and then every year after that, the rate can adjust every year for the rest of the term. WHO DECIDES WHETHER A BUYER WILL HAVE A FIXED RATE OR ADJUSTABLE MORTGAGE? What we would do is if we think it’s a bene t, we could compare the two. Right now, the rates on the adjustable rates aren’t really any better, so there would be no reason to suggest an adjustable rate right now. But if there was a time that rates are really high and adjustable rates get to be lower, then some- one may qualify on an adjustable rate versus they may not qualify on a xed rate. Everybody is doing xed rates right now. ARE PEOPLE STILL REFINANCING? The re nance market is pretty much dried up right now. The only people that might re nance would be someone that has to get cash out of their house. Or, I’ve had some people re nance because they’re getting a divorce and they have to re nance the other person o the loan. Very few people missed the boat when the rates were low for the re nance. HOW CAN HOME EQUITY BE USED TO A HOMEOWNER’S ADVANTAGE? The best way to do a home equity right now would be a second lien. That way, if you have a good rate on your rst lien, you don’t have to touch it. Basically, you get a second mortgage. An equity loan could help people pay o debt, do home improvements, pay for college, just have money for a rainy day with the crazy economy happening right now. So there’s lots of ways that an equity loan would still be bene cial.
Sheri McKim said, there are several mortgage loan programs that are bene cial to rst-time homebuyers. Those include:
TSAHC:
A loan from the Texas State A ordable Housing Corp. provides 30-year xed interest rate mortgage loans, down payment assistance and mortgage credit certi cates to homebuyers in communities throughout Texas. The programs are o ered through a network of approved mortgage lenders.
SETH:
Loan programs from the Southeast Texas Housing Finance Corp. help promote a ordable housing opportunities for low- to moderate- income Texas residents.
TDHCA:
The Texas Department of Housing and Community A airs has various loan programs that administer funds to residents through partnerships with cities and counties that receive no direct allocation of federal housing money, nonpro t and community-based organizations, private developers and public housing authorities.
Travis County—Hill Country Home Down Payment Assistance:
SOURCES: SHERI MCKIM, WWW.FHA.COM, WWW.SETHFC.COM, WWW.TDHCA.STATE.TX.US, WWW.TSAHC.ORG COMMUNITY IMPACT NEWSPAPER The Travis County Housing Finance Corp.’s HCHDPA program helps homebuyers with government-backed loan nancing.
Benchmark Mortgage 715 Discovery Blvd., Ste. 212, Cedar Park 512-244-6490 https://austin.benchmark.us
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COMMUNITY IMPACT NEWSPAPER • COMMUNITYIMPACT.COM
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