⏱ THE MORTGAGE MINUTE

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In the lead-up to Halloween, we’re seeing some scary sentiment out there. With rates rising and elections looming, everyone seems to have locked the doors, closed the shutters, and hunkered down. 

But what goes up, must come down…eventually. Once you’ve been in the real estate and mortgage industry long enough, you start to see enough of these cycles for what they are: a holding pattern. 

The Fed is still on track to lower rates, which will make borrowing cheaper for a whole lot of home buyers. This slump won’t last forever. And just like a zombie rising from the grave, demand will come roaring back. 

Those who keep themselves ready during a slowdown are always the best positioned to help borrowers make their move when the time comes.

Will you be ready when they decide to open their doors and come outside? 

We’ll do our best to help you stay prepared.

Loophole Spotlight

Dual Agency

If you’re a loan officer with a real estate license, representing a buyer in both roles can be a game-changer if you’re doing business in a state that allows dual agency. 

If you’re unfamiliar, dual agency is when you, as the lender, also represent the buyer.

But here’s the tricky part: we know many loan officers rely on referrals from real estate agents. So you don’t want to be cannibalizing any future business with them over one transaction. That’s why this strategy works best for friends, family, and buyers you generate through outside marketing.

Now, why is this an advantage for you? As the lender, you’re already making your commission on the loan side, so (if necessary) you can get lean on the commission as the real estate agent. And with the recent NAR settlement leaving some sellers choosing not to pay a buyer’s agent commission, you can go even leaner if your buyer ends up in a tough spot.

But before you dive in, a reminder: full disclosure to all parties involved is necessary to avoid any conflict of interest, and some states (looking at you, Texas, Oklahoma, Vermont, Wyoming!) don’t allow dual agency (with a few minor caveats). 

Here’s what to look for if you’re doing a transaction in one of those states:

Oklahoma: Dual agency is illegal, and agents may only operate as transaction brokers or single agents, meaning you cannot represent both sides or hold dual roles in the same transaction. 

Texas: Dual agency is prohibited, but there is an alternative called “intermediary with appointments,” where different agents from the same brokerage represent the buyer and seller. 

Vermont: Dual agency is not allowed, though firms with more than two agents can use designated representation, where separate agents represent the buyer and seller. 

Wyoming: Dual agency is illegal, but firms can use designated agents to represent each party.

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In states that allow dual roles (looking at you, California!), you can jump in to represent clients on both sides when you feel it is necessary or helpful. Just be sure to check the state’s guidelines and brokerage policies to ensure you’re fully compliant.

Remember: transparency is everything!

Jumbo-brag

This is BIG. Well, JUMBO, in fact. Because United Wholesale Mortgage (UWM) just rolled out a new jumbo cash-out product with an eye-popping 89.99% loan-to-value (LTV). And if you can believe it, no mortgage insurance required.

Yes, you read that right. NO MI!

We’ll give you a moment to let that sink in.

Up to $5 million in loan amounts with no MI and–get this–still up to a 50% max debt-to-income (DTI). Most lenders cap cash-out LTVs at 70% and jumbo loans at $3 million. Plus, a lot of jumbo loans cap at 43% DTI. So, yes, this is a big deal–especially for high-balance clients in areas like California.

Now’s the time to look back towards those old leads for debt consolidation, home improvements, and clients who were looking to tap into their equity without those steep MI costs. 

While there will naturally be some additional risk baked into the rate, UWM still contends that they will be better than home equity lines of credit (HELOC), making this a great option for several of your borrowers–especially those who don’t want to pay MI!

Many Buyers Ready to Make that Home Run Play

Think in this current rate environment that buyers have just totally given up on buying a new home? 

Think again. 

According to a recent article by Scotsman’s Guide, a whopping 77% of buyers who currently feel sidelined by market conditions are just waiting in the wings. These buyers are prepped, lined up, and ready to go as soon as the market tilts in their favor.

If you’ve got someone on the fence, consider the 1/1 lender-paid rate buydown. For 70 basis points (BPS), they can buy down the interest rate a point for the first year. That little nudge might be all it takes to turn a hesitant borrower into a happy homeowner, eager to pounce when the rate feels right. 

Per the article, over a third of buyers are eyeing 5.5%, and 21% would make a move at 6.0% or below. Another third say they’re holding out for less than 5.0%, which would make the rate buy-down option key.

One catch: the 1/1 buy-down only works for correspondent loans, not broker, so make sure you’re set up right before you make the pitch.

Bottom line? Even in this current rate environment, this market is full of motivated buyers ready to go. A little creative financing could be the tipping point that turns today’s “not right now” into tomorrow’s home run.

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!