Page 10 - November 2021 Issue.indd

DOLLARS AND SENSE by Tolbert Rowe

Is Now a Good Time to Take the Plunge of Purchasing Your First Home?

Last month I discussed getting yourself Mortgage products made qualifying equity in their home as leverage to

ready to purchase or rent your fi rst home even easier with adjustable rate and refinance to a lower fixed rate when their
and the steps necessary to prepare for payment option programs that allowed financial situation was better, hopefully.

the leap to running your own household. borrowers to pay less than the interest Unfortunately, this equity was never
Suggestions I made for those looking to due so negative amortization dug the realized and evaporated when values
purchase are also prudent things to do hole even deeper. Negative amortization tumbled 40% to 50% in a very short
if you intend to rent. increases the loan balance every month time.
instead of reducing it like a traditional
The challenge of purchasing a home Fast forward to today and it may
mortgage where some of the monthly
in today’s market is the degree that seem that the real estate values are
payment goes toward reducing the
home prices have risen in the last 12-18 experiencing “déjà vue all over again.”
principal balance.
months. Since the initial shock of the Or is it?

pandemic wore off in May/June of 2020 At that time real estate values were going House prices have risen 20% to 40%
the real estate prices have been on a up so fast that buyers were convinced in the last 12 months, depending
straight shot upward. In most markets that values would continue rising and on the area and price range. Not
and price ranges, prices have gone up mortgage products at that time required because underwriting guidelines and
20-30% since early 2020 as demand for very little, if any down payment or requirements are very lax and there is a
homes to purchase has far outweighed up-front equity. Credit standards and full menu of non- traditional mortgages,
the available supply. lending requirements were so lax that like the early 2000’s. Today’s lending
anyone could qualify for a mortgage.
If prices are reaching their highest levels guidelines are very tight and if you do
in decades, is now a good time to take No income verification loans, or “liar get a mortgage today, you have earned
the plunge of purchasing your first loans” meant that anyone could make it. Ask anyone who has applied for a
home, or any home for that matter? up whatever income was necessary to mortgage how “easy” the process has
qualify, if willing to pay a higher interest been? Stars must align with a borrower’s

Those who were born before the Gen rate. If a borrower had the verified credit, verified income, property value

Z generation (the period from the mid income to qualify, why wouldn’t they and funds invested in the transaction.
1990’s to early 2010’s) will remember want a lower interest rate, or need to do
the real estate meltdown of 2007-2008. a stated or no income loan? The mortgage process is not really
Many experienced the devastation of different than it has always been.
losing their house to foreclosure due to With property values climbing monthly, Information is provided by the
“non-traditional” mortgages that only borrowers using these “non-traditional” applicant. The information is supported

fixed the interest rate for a short period loans felt that a higher interest rate was with documentation, the value of the

and then the rate adjusted higher and a small price to pay if values continued property is supported by a certified
higher making repayment harder and to go up. They would refinance to a appraisal and, if no red flags pop up,
harder for homeowners. more traditional mortgage using the your loan is approved. Th e repayment
of your loan will be completed with

fixed monthly payment that amortize
or repay the balance over a fi xed period
“Your Mortgage Consultant Since 1985”
of time, or term. When interest rates
Purchase or Refinance fell below 3% demand for homes to
purchase exploded.
Real estate prices are driven by the most
basic of economic reasons, supply, and
demand. Prices go up when there is
115 E Dover St. Ste 3 - Easton, MD more demand for a product than there
is supply. Conversely, when there is a
tolbert@baycapitalmortgage.com C. Tolbert Rowe, larger supply of a product than demand
www.baycapitalmortgage.com NMLS Vice President/Lending
182844 for that product, prices go down, or at
the very least they stop going up. Look
410-819-3005 / cell 410-310-3520 at what is happening today with prices
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