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Mortgage Outlook for Relocating Transferees

Over the course of 2015’s first quarter, a lot of home buyers found that obtaining a mortgage was easier than it had been in the past. And, it’s true. Banks seem to be more willing to lend now compared to recent years, though they’ll never admit any hesitation in the first place. A lot of this ease stems from the new loan options out there as well as current housing and economic trends around the country. In fact, the Zillow Mortgage Access Index tells us that access to mortgage credit is almost 70 percent of the way back to 2002 levels. To make a long story short, the economy and housing market have put lenders in a position where they are more willing to lend. So, what does this mean for your relocation program or for your transferees?

 

Mortgage Outlook for Relocating TransfereesWe all know that summer is the busiest season in the moving industry, but spring isn’t too far behind. It’s certainly busier than the frigid winter months and so we can say that home buying and moving are officially on the incline for the next several months. What do your transferees need to consider in terms of mortgage shopping for their new home?

 
Your transferee needs to:

 
1. Determine the type of loan necessary: The type of loan will depend on the amount of time one plans to stay in that home. Is the relocation more of a long term assignment or is it permanent? Is the transferee a first time homeowner or are they refinancing?

 
2. Understand where they stand: This one is pretty much common sense. Naturally, a transferee with amazing credit and a huge savings account will have a pretty easy time securing a loan. However, a lot of people aren’t necessarily in such a great position and it’s important for the transferee to understand that their financial and credit history may require a lender with some strong underwriting flexibility.

 
3. Choose the right lender for their need: There are three types of mortgage lenders:

a. Retail Banks: Retail banks underwrite, approve, and close loans for homebuyers and either keep the loans on their own balance sheets, or sell them to investment firms who then bundle the loans into mortgage bonds. Working with a retail bank is great because they tend to be more flexible with loan terms since they can keep the records on their books. Plus, if you open a checking or savings account with them, they may even offer even lower mortgage rates.

 
b. Mortgage Banks: Mortgage banks are like retail banks in that they underwrite, approve, and close loans for consumers but a mortgage bank will always sell the loan to either a retail bank, investment firm, or Fannie Mae or Freddie Mac, who will then bundle the loan. Working with a mortgage bank is has its benefits too. The designated loan agent serves as a one stop rate shop for the consumer and can move very quickly since they control the entire process.

 
c. Mortgage Brokers: Brokers go through either retail banks or mortgage banks to obtain a mortgage for the buyer. They can rate shop across a large number of banks which allows them to lend on tougher borrower profiles. In all honesty, this approach hasn’t been popular since before the crash in 2008. However, you can be sure that the mortgage brokers still standing are long term, highly experienced veterans in the business which is a good sign.
It’s also important to acknowledge that banks are now more sensitive to the loan to value ratio of the home. In other words, lenders will require a bank appraisal to make sure there is sufficient value in the property to cover the amount borrowed. This is important because it has and will impact the seller in addition to the buyer because the bank needs to agree on the property’s value, even if the buyer agrees to the set price beforehand.

 
While obtaining a mortgage has become a simpler process compared to recent past years, the days of no-document loans are definitely gone. Transferees looking to buy a home will need to provide documentation supporting their ability to pay. With the spring season upon us and summer not far behind, your relocating employees will soon find themselves in a home buying position. Why not provide them with as much free information as possible?

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MIKE CANNING
VP, Client Services

RICK CALANNI
VP of Business Development Northeast Region

 

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