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The years following the 2008 financial crisis saw housing financing solutions retreat into straightforward, safe solutions while 30-year mortgage rates sat at comfortable lows.
Now, with rates at 20-year highs, risk has re-entered the conversation.
Bob Groody of Maxwell and Shant Banosian of Guaranteed Rate discussed the current state of creative financing tools for consumers at Inman Connect New York on Tuesday with moderator Clelia Peters of Era Ventures.
“From 2000 to 2008 it was the wild Wild West in terms of home products, everything was fancy and complicated, and obviously we saw what that led to,” Banosian said. “In the last 13 years, you saw very conservative, almost boring just plain home products.”
As the market has shifted, so have lenders’ strategies and riskier products like DSCR loans — or debt service coverage ratio loans — and non-QM loans — which allow consumers to qualify for loans based on alternative methods rather than traditional income verification — have re-entered the conversation.
As the market adjusts to higher mortgage rates, it’s the responsibility of mortgage lenders to inform their customers of all the options available to them to help them get loans, Banosian said.
“I think it’s our job as loan originators to serve our consumers and help them in this market,” he said.”I believe that the housing market moves with the availability and affordability of money. We saw what happened when rates went from 3 to 6 and it’s like the breaks went on. Now, our industry has reacted to that and is educating and informing our consumers and is advising them, and we’re showing them all the different types of products out there.”
Along with non-QM loans and DSCR loans, products being offered to consumers more frequently are permanent buydowns and temporary buydowns.
For would-be homebuyers attempting to get a hold of a mortgage while rates are at 20-year highs, it’s important that buyers have confidence in their lenders and the products they’re recommending, Groody said.
“That confidence factor really affects the buyer,” Groody said. “Making a buyer confident that they qualify… All those things build that confidence that I think the customer really deserves and frankly the agent deserves because they want to make sure that they’ve got somebody who’s ready to buy.”
