Tuesday, 12 April 2016
Mortgages have done a 180 in the past decade.
From the pre-housing crisis days low interest rates (combined with aggressive non-traditional mortgages) meant that countless borrowers found themselves in homes they couldn't afford. This reality hit families hard when the economy tanked and millions of Americans faced foreclosures and mortgage-related bankruptcies.
Mortgage-related headlines in recent years have alerted would-be home buyers that easy capital at rock-bottom rates are a thing of the past, and getting a mortgage is more difficult than it's been in decades. There is some truth to this observation, but there's still lots of opportunity for buyers, says Eddie Castañeda, BBVA Compass Executive Director Real Estate Lending. Regulation means only good things for consumers—and attractive terms are still highly accessible and will be moving forward, Castañeda says.
"If you have a stable job and good credit, there is no reason you shouldn't be able to get a mortgage," he says. "The mortgage industry realizes that it needs to change to attract new and younger buyers—and it is."
Looking ahead, consumers can expect to see more products that require less than the traditional 20 percent down payment, Castañeda says. Last year, Fannie Mae launched a new program making it easier for lenders to extend 97 percent financing for home purchases.
"We're going to see a lot more aggressive marketing of different types of mortgage products," Castañeda says. "You don't need 20 percent down to buy a home."
Consumers will continue to benefit from stricter regulation designed to educate and protect borrowers. In October 2015, the Consumer Finance Protection Bureau launched its "Know Before You Owe" program that makes it easier for borrowers to understand their mortgage's terms before they close the deal, and compare terms from multiple lenders. This regulation requires lenders to revamp their practices, a challenge BBVA's Castañeda says may mean some originators will drop out of the market. "There is much less flexibility in mortgages today than 10 years ago," he says. "But every rule is designed to protect the customer."
Home buyers can expect these new products to be offered in more convenient ways, including by increased online applications and extended broker hours, Castañeda says. And, like many economists, Castañeda expects interest rates to rise by the end of 2016. Until then, housing prices will climb, he says.
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