Guest: Joe Kelly
Are you hoping to get a mortgage in 2014? Or trying to take advantage of low mortgage rates before they rise? Then you’ll want to make sure you listen to this interview with Joe Kelly from ArcLoan.com. Joe has over two decades of experience as a mortgage educator and expert, and he’ll tell you what to expect and how to prepare.
Gerri: Joe Kelly is the President of ArcLoan.com, it’s home of the automatic rate cut loan - ArcLoan.com. Joe's been in the mortgage business a long time so he’s seen the ups and downs, the good and the bad, and he could help guide you through what you need to know in today's market.
Joe, 2014 is shaping up to be a time for buyers to buy because values have been increasing, things are stabilizing, people are saying now is the time to get into the right property and stay there, and want to do it before interest rates go up. What are you seeing with the clients that you're talking with?
Joe: Gerri, that’s certainly the talk in many, many parts of the country especially down in Florida. All the areas that got hit so hard five years ago, for the last two years have been seeing quite a rebound and we see that continuing into 2014. There was a good pick up this year as we closed out 2013.
The biggest motivating factor for anybody who is looking to make a move if they already own a home or if they’re looking to buy their first home is the fact that interest rates have started to rise again after hitting the six-year lows this year, and that comes into play when you're looking to buy a home.
Gerri: Yes, it does. Although I keep going back to the fact that when I moved to Florida in 1999, we had a maybe 67% interest rate on our home in Virginia that we left and we just didn't think it’d go any lower than that.
Joe: Exactly. You bring up a great point, and you’ve mentioned that I’ve been in the business a long time and actually to date myself it has been a long time. It’s been almost 25 years. And when I got into the business, mortgage rates were above 10% around the 1990 timeframe.
And so the fact that they hit a low in a thirty-year fixed rate of around 3%, 3 ¼% earlier this year, and now they’re in the 4% 4o 4.5% range, they could hit closer to the 5% range, it’s a big jump off of that low point. But over a historical period of time or even over the last ten years, they’re so incredible.
And that's why I have a sense of urgency when I’m trying to pass the word on to potential buyers, and that’s why they hear it from other folks in the industry. It’s not a sales pitch, it’s trying to put it into perspective that interest rates are still great but that the prediction is they will continue to rise in the coming years as the economy gets more on track and as inflation comes back into play.
Gerri: And speaking of putting things into perspective, one of the trends that I've noticed in a lot of the bloggers and the websites that you read is that people are saying you really shouldn't buy, you should rent because look at what happened to all the buyers and how they got burned. But on the other hand, there are some real benefits to owning over time, so let's just talk about that a little bit.
Joe: That’s a great point to bring up. The point should be when you look at the mortgage collapse and the economic collapse that happened five years ago and for a period of three years after that, and then it feels like we’ve still been in it through the whole five-year period of time. But really for the last twelve to eighteen months, in most parts of the country, you’ve seen this rebound in home prices from the average prices.
I did some research before this call, down in Florida, in Sarasota and Tampa, really since 2010, 2011 on to now has been rising. So when we say it's better to rent versus buy, of course it is if the values aren’t going to go up any higher and/or of they’re going to drop, and if the rents that you can get for the property are comparable to the type of property that you could buy, that would be a fair piece of advice.
However, as values now our back on track to being an appreciating asset, and the fact that in many parts of the country rents have been going up significantly because of the demand and the dwindling supply of rental properties, you really need to stop periodically whether it's every six months or whenever you’re at that point of saying is this something we can consider from a financial standpoint, that meaning qualifying a down payment, etc., you really need to do that evaluation because there are benefits to owning.
You mentioned there are tax write-offs you have the on the interest part there’s deduction, in the property taxes, the fact that you own the property you can do with it what you want to do as far as decorating and all these types of things, and the potential to appreciate and build equity are significant compared to renting a property.
Gerri: Joe, let's talk about what it takes to get a mortgage today. What does it take to qualify because that’s the big scary thing in the room that everyone is afraid of.
Joe: Gerri, there’s no easy way to put qualifying for a mortgage in today’s world at all. It almost is always feels like you’re having your teeth pulled or getting your lives in-depthly examined. It’s a tough part of the industry. But that’s because you’re being loaned hundreds of thousands of dollars and so the industry wants to take a look at that.
As far as getting a loan, the three main components in getting a mortgage that come into play are your income, your assets, and your credit, and those three areas get looked at in detail. There’s different variations depending on the loan program, how much equity or down payment you’re putting in that make some variance in those criteria.
But you need to take the time and there’s no obligation in talking to a recommended lender. We recommend and hope that you’ll come to work ArcLoan.com. We do business in all fifty states and we’ve been doing it for a long time. We’ll do what's called a pre-approval or a pre-qualification, depending on how much detail you want to get, that gets that information and gives people feedback on what they could potentially qualify for. Again, it doesn’t lock them in but you need to talk to someone who is knowledgeable, who has a good reputation, who knows the different programs and can step you through what's going to be needed in order to qualify for a mortgage.
Gerri: And what about down payments, Joe? For someone who doesn't have 20% down are there still programs out there with lower down payments?
Joe: Absolutely. The number one best program remains to be a VA mortgage and that means somebody who has VA benefits from serving or they’re married to someone who served. You can get in for 0% down and literally no money out of your pocket because you can have the seller or the lender pay the closing cost.
If you don’t qualify for that, if you weren’t in the military, then you can get in the programs for as little as 3% down and depending on the program that money can come as a gift from a family member if you have that ability, so you don't need a lot to get in.
But if you have the ability to put 20% down, you can eliminate what’s called mortgage insurance which is a very significant part of that monthly payment. But of course, the trade off having 20% to put down.
Gerri: What’s the biggest hurdle? What’s the one thing you want somebody to be ready for when they come to you at ArcLoan.com?
Joe: Number one thing is getting pre-approved, speaking to a lender beforehand so they could take a look at your credit. And if you don’t want to talk to a lender the next most important thing is checking your credit score and checking your credit report making sure that it’s accurate, being able to clear up any errors so you can get that credit score as high as possible from where you’re at.
Your income is what it is, however, you need to document that. Not everybody out there has a straight salary. Many people are self-employed or they get paid bonuses, or they’re paid hourly, and then it gets complicated. You really need to talk to someone in those who can tell you what income’s going to be used for qualifying.
Gerri: Yes, that’s the key thing. There are lot of wrinkles and you need to be prepared for those. Joe, thank you so much for joining me.