William Arthur Ward said The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails.
Here at Hourglass, we are constantly adjusting our sails to adjust to market realities. I would like to take this opportunity to talk with you very specifically about some of the challenges that we and our clients are facing today.
Before jumping into that, however, let me lead in with some good news. After a challenging, slow period in the local purchase market, we have seen a recent, noticeable up tick in properties going to contract. We are also seeing a different attitude among buyers. Earlier in the year, buyers were worried. They were concerned that perhaps the market had further to fall, and that their property would be like a new car worth less after purchase. Todays buyers are comfortable with their value proposition, happy to be making a long-term commitment to the area, and excited about moving forward.
The thing that most concerns sellers and real estate agents is the fear that the buyer will not be able to obtain mortgage financing. I am happy to tell you that the buyers that we see who are mostly high-end buyers - are qualifying readily for mortgages and have a range of attractive choices for financing options.
That is the good news. Here is the reality check.
#1. Todays jumbo home market requires a minimum of 20% down for second home purchases; many banks require 25% or more. The days of buying a second home with 10% down are gone.
#2. The conforming loan limit in Litchfield County is and remains $417,000; mortgages higher than that amount are jumbo or super-jumbo. Conforming loan limits are higher in Fairfield County($708,750) and some other Connecticut counties.
#3. Appraisal procedures have changed significantly for most conforming loans and many jumbo loans. This change adds time, expense, and uncertainty to the mortgage process.
#4. The balance of power has shifted as between buyers and sellers. We see buyers insisting on private property e.g., furniture and antiques - being included in the sale. Our main concern in this area is to be sure that all parties understand that banks will not finance private property. Therefore, these items should not be included in the legal documents that will become part of the mortgage application. Rather, it is best if they are agreed upon in side addenda.
#5. We see some sellers pressing buyers to provide mortgage commitments in an unrealistic time frame. While we can understand that sellers are anxious, we would like all parties to understand that todays mortgage process involves more work, more paper, and more time. All parties must work together to obtain a commitment in a timely fashion. For instance, when we request all pages of an asset statement, we do so because the lending institution requires it. If the borrower provides just the first page, then we need to go back to the borrower, request the additional pages, receive them, and etc. Delays in responding to information requests slow the process and may jeopardize rate locks and closing dates.
Bottom line, things are not as simple as they used to be. However, we still have a functioning mortgage market with attractive rates and appealing options. It is just more difficult to navigate through that market; that is where we can help.
Through these trying times, our business has continued to prosper and even to grow. We want to thank all of you for your role in our business success. Our business is built on referrals from satisfied customers and from colleagues in the business who have had good experiences with us. Again, thank you!
As always please do not hesitate to call or email if I can help you or your clients in any way. It is never too early in the process to call.
Craig M. Cooper
President, Hourglass Mortgage