⏱ THE MORTGAGE MINUTE

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We’re fast approaching the midway point of the year. Are you on target for your real estate deal resolution goals that you set in a hurried frenzy before the countdown started December 31st? Are you way, way behind? Should we just not talk about it? 

Whether it’s been a slow start, or your best year ever, our goal at The Mortgage Minute is to give you the insight, tips, and knowledge to help you grab just a few more deals that you might have otherwise missed and help you cross that finish line. 

So, let’s dive in!

Market Sentiment & Economic Calendar

Wholesale pricing for brokers is looking sharp these days! 

Conventional par pricing in the wholesale channel is hovering around 6.5%. We estimate on average brokers have 150 BPS advantage over most retail competitors. 

That’s a ton of extra margin to put to work in your business!  

Now for the real question for brokers:

Results are anonymous.

Averages will be posted next week!

What to Watch This Week:

Thursday, June 27

• Q1 GDP – We anticipate that this number will come in soft leading to a decrease in mortgage rates. 

Friday, June 28

• Core PCE – This is Papa J. Powell’s preferred measuring stick for inflation. It removes the volatility of food and fuel from the equation, which smooths out the data. We anticipate that this number will come in soft, as well, leading to a decrease in mortgage rates.

Pipeline Save of the Week

We’ve got those Debt-to-Income blues.

*cue jazz saxophone*

We’ve all been there. The perfect deal. Everything is falling in place. There is literally no way anything is going to mess with this beautiful work of art that you’ve put together. And then you realize your hubris got the best of you because of course something was going to go sideways.

Well, that’s pretty much what happened in this week’s Pipeline Save. 

The broker had a jumbo purchase and chose to send it to NewRez due to it offering the best pricing. It was a tight debt-to-income (DTI) ratio, but was holding steady below the 45% threshold. The borrower had a divorce pending at time of application, but those factors were taken into consideration at the outset.

Months pass.

Guess what happens when someone is going through a divorce and several months pass? Altogether now. Say it with us. 

The divorce was finalized.

Wow. Great job, everyone. We could really hear the passion in your voice.

That’s right, the undertaker (Whoops. Underwriter. We meant underwriter) found a debit in the bank statement with a memo that read “support payment.” 

A letter of explanation (LOE) was red-letter stamped CONDITION. 

That additional expense took the DTI over the threshold and the whole deal was about to fall apart.

The broker needed a pivot – fast.

With no cosigner in sight, staying with NewRez was, unfortunately, no longer an option.

But like Timothée Chalamet in the desert, a savior appeared in the image of UMW. (That reference is for the kids.)

UMW has jumbo loans that go up to $3 million and a DTI of 50%.

The broker transferred the loan and appraisal faster than you can say “spice run.” It was fast tracked and closed on time thanks, in part, to the broker having a deep bench of knowledge when it comes to different lenders.

Takeaway? It’s usually a good idea to move extremely fast once a file hits escrow. Just assume your borrower wants to buy a new car at the same time they’re buying a house because for some insane reason they ALWAYS DO. 

You can use the time to dot the i’s, cross the t’s, and do some overall backend clean up. Or, in a worst case scenario, pivot to another lender.

Reminder to send in your own Pipeline Saves of the Week to be featured in future newsletters!

Loophole Spotlight

The Broker’s Advantage

Brokers can have a huge advantage over direct lending due to the ability to choose between hundreds of banks. Direct lending has its benefits, but would not have afforded the pivot presented in this week’s Pipeline Save. If you are with a broker, don’t forget to include that as a service you offer during your intake call. Oftentimes it can be overlooked at the introductory pitch, but in reality it is one of the broker’s greatest strengths.

It’s important to point out to your borrowers that you not only shop interest rates on their behalf, but also loan types, customer service, turn times, etc. You have the ability to pivot from one lender to another if something goes sideways in a transaction. This gives you more power to negotiate on your borrower’s behalf. This may become increasingly useful if we experience a rapid decrease in interest rates. 

If you have a locked-in loan with a lender that won’t float down, being able to pivot the loan to another lender could be the very thing that saves your deal.

Interest Rates: Steady as She Goes

Ahoy, mateys! In news this week, Forbes asked several experts to predict where interest rates will go in the coming months, and the consensus seems to be one word: steady. While surveying no less than eight “experts” wielded predictions as low as 6.25% to as high as 7.5%, most seem to believe they will hold above 6.5% through the end of the year.

But be sure not to give up the ship, because even a small drop in rates can create a huge opportunity for your pipeline. Anytime there’s a quarter to half point reduction in interest rates, it’s time to pull out the calculator and start crunching those numbers because more often than not it will pencil out as a net benefit for a refinance for your borrower.

(Do a few crunches on those abs while you’re at it, too. It is swimsuit season, after all.)

Be sure to stay in touch with them every few months. A steady check-in will give them the confidence that you’re keeping an eye on interest rates on their behalf, and they’ll be ready to go when rates hit that sweet spot. 

Batten down the hatches. When it comes to the real estate industry, it’s full speed ahead.

Down the Down Payment Rabbit Hole

For some, saving for a down payment can take decades, according to a recent study. For minimum-wage workers, saving for just an 8% down payment would take about 23 years at the national level. In some states, like Utah, that timeline expands to 34.1 years. Chasing Alice down the rabbit hole for that long might turn a potential borrower into the Mad Hatter.

But all is not lost, because even those potential borrowers may have options that they typically might not think about. Several programs have gone live (with an increasingly growing list) that allows borrowers to buy a home with as little as one percent down. 

And since homeownership can be the gift that keeps on giving, remind them that friends or family can gift to them down payment funds. 

Making a plan to save up tax refund checks and employment bonuses might get them closer than they think. 

And if your borrower is fortunate enough to be in the position of a possible inheritance, have them consider discussing an early inheritance gift with their parents so they can get a head start on growing that equity. 

It’s up to you to be their advocate and turn their gaze away from a “through the looking glass” feeling of hopelessness and towards a hopeful dream of homeownership.

Stay Connected

See! We told you! Five minutes or less!

Crazy how much we packed in there, right?

Thank you for being a part of The Mortgage Minute community. Stay tuned for next week’s insights and tips!