A Lending Hand: Residential lenders discuss the home-buying process

Whether as a first-time home buyer or an experienced homeowner looking to downsize, a plethora of variables comprise the buying experience.

More than 70 percent of Americans consider homeownership to be an important part of the “American Dream.”

With rent continuing its ascent – compounded with the hoops it takes to leap through during the residential scouting process – many Americans are educating themselves on the home-buying experience.

For Eric Mitchell, building and sustaining relationships with his customers is of the utmost priority.

“Being an open-minded lender and an advocate for the people is what we do. This is what I get up for every day, to be able to change someone’s life,” Mitchell said.

Trust is much a factor as financials, Mitchell said.

“Reach out to a lender you know and trust,” he said. “Ask all of the questions you can possibly think of. No question is a bad question.”

One misnomer that continues to circulate is a deep financial portfolio or a large down payment at or exceeding 20 percent.

“When you go to buy a home, don’t think that you have to have a whole lot of money,” Mitchell said. “They have people for down payment assistance. I would say that if it is something you are interested in, I would just say go for it. I know some people get nervous about stuff like that and think that they can’t do it. Just reach out to someone and try to get pre-qualified. There may be some obstacles but at least the lender can point what to do to get on track.”

Mitchell oversees Great Southern Bank’s Open Door Program in the St. Louis area, helping low-to-moderate income customers find their ideal home.

The topsy-turvy world that is the Federal Reserve and the rate hiking that has been geared toward containing and slowly but surely slowing down inflation, has had little effect on his day-to-day duties.

“People are paying a lot more, so it makes it more reasonable to purchase a home. When you are paying $1500, $1600 a month for rent, it just makes perfect sense,” Mitchell said.

Mitchell said for renters and first-time home buyers the [interest] rate really isn’t “a big issue.”

Cost of home ownership

Upfront costs may include the following, so beginning preparations nearly two years out is a wise strategy.

·????????Costs may include up to 20 percent for a down payment.

·????????2-5 percent for closing costs.

·????????Inspections can run $200-$600, depending on the size of your home, where you live, and what you want inspected, according to Claude McGavic, executive director of the National Association of Home Inspectors.

Ongoing costs may include the following:

·????????Mortgage payments

·????????Maintenance and repairs

·????????Utilities

·????????Homeowners’ association fees

Home-buying process: Then and now

Stephanie Sweet celebrates a career milestone this year as it is her 10th at Great Southern Bank, and she has spent a total of 23 years in the mortgage industry. That’s a lot of residential loans.

In 2009, the residential lending and construction industries were hit hard due to the recession. And, in 2020, it was the pandemic that tossed a wrench into the proverbial spokes.

In 2022 and so far in ’23, interest rate hikes by the Federal Reserve placed a forced pause on those looking to secure residential loans and those looking to sell homes. But the times are changing.

“There was a slight pause in the purchase market when rates started rising. It took homebuyers a bit of time to adjust to the higher rates since they were so accustomed to the lower rate market that we had been in. But we are seeing an increase in the amount of borrowers deciding to go ahead and get pre-qualified to buy homes. Their desire to own a home is pushing them to evaluate the cost of renting versus the cost of homeownership and, currently, homeownership still makes more sense to borrowers,” Sweet said. “We do have clients reaching out to put their home equity loans on a fixed rate and to consolidate debt with the increase in credit card rates but overall refinances have slowed down.”

Residential lending comprises many variables, and one that resonates with Sweet is the relationships she forges with customers. Something in which she takes great pride.

Added Sweet: “I get to be a part of the biggest investment most people ever make. What I do creates memories people will have for all their lives. A home is where people raise their children, where they spend time with family, where they can express themselves in the way they decorate the home truly making it theirs, it is where people find comfort. This is more than lumber and brick; it creates stability and creates a feeling of accomplishment for all.”

The real estate market is slowly returning to where it once was, as prices have begun to cool for the first time in nearly two years.

“I have been in lending for 24 years and being a homeowner seems to be more important to clients than ever before.?People want to own their own home, and they are smart enough to know history has shown rates go up and down, but owning a home is a priority. The only reason more people are not buying is because we need more homes on the market, which seems to be the biggest reason that customers are not buying that I am hearing,” Sweet said.

Greener pastures on the horizon?

Whether as a real estate broker or a mortgage lender, Lorrie Kleier has certainly seen changes over the years. From low interest rates to the 2008-2009 recession to COVID, Kleier knows what it takes to navigate choppy economic waters.

As of Wednesday, June 14, the Federal Reserve did not raise interest rates in their latest effort to tame inflation.

Kleier has seen both sides of the economic equation, as she spent 28 years in real estate prior to joining Great Southern Bank as a residential lender. In short, she has seen a thing or two.

“Some of the things I have seen are the requirements for the borrower have increased so greatly than what they were from when I first started,” Kleier said. “Documentation was very, very minimal. It was so much easier to walk into your local bank. They already know you and they were good to go if they thought you were a good risk. Anymore, the documentation needed is just unbelievable. In real estate, that really started after the 2008-09 crash.”

As for tips and advice for borrowers, Kleier was quick and to the point.

“I would just tell borrowers to start early collecting documentation. And if they need to talk to a lender, a lender can give them a pretty good idea of what is going to be required,” she said.

Borrowers share private, sensitive information with lenders when attempting to secure a home loan, which gives the lender-borrower relationship a newfound sense of camaraderie.

“It’s never ceased to amaze me how personal the relationships become,” Kleier said. “They [borrowers] have to go to a lender they feel like they can trust, who really is looking out for their best interests … who knows how vital confidentiality is.”

Key points for borrowers:

·????????Reflect on your situation

Be sure to think about your reasons for wanting to purchase a home, your current and future lifestyle, your budget, available savings and current debts.

·????????Timing is crucial

While there are many benefits, homeownership is not for everyone at every stage of their life.

·????????Know your needs

?By evaluating your specific needs and financially preparing for homeownership, a borrower will be better able to identify an ideal time to buy a home.