It's still the first half of January, and if you're like me, you spend a good part of January analyzing 2023 to better prepare for 2024. The mortgage industry in 2023 had its ups and downs (like the usual rollercoaster that it is -- Good thing I like thrill rides!). I've already had a few people (past, present, and new clients) ask me: What will buying a home in 2024 be like compared to last year? My answer to that is as curvy and complex as a rollercoaster track, but let's start with the challenges.
The Challenges of Buying a Home in 2024
I've said this many times, and I'll say it again: Interest rates are not the root of the problem. Yes, interest rates are "higher" (compared to what we experienced in 2020 and 2021), but that's not what caused the market slowdown in 2023 -- that's only a symptom.
The market slowdown was caused by a much deeper, economic issue:
Many people's incomes do not match their cost of living.
Read that again, and let it soak in. In the last couple years, the scales have been tipped in a not-so-good direction. That's why you kept hearing on the winds (aka, in the media) whispers of a recession, rising costs of home prices, gas, food, etc. (and pretty much everything else) while incomes remained the same (or went only slightly up or down, depending on who you talked to). This problem is exactly what caused many homeowners who would have sold their home in 2023 not to sell (because the cost for the new home they would have wanted to buy, they couldn't afford), and what caused many buyers to not buy (because they could only qualify for a $300,000 house, when what they really needed was a $450,000 house). This challenge, unfortunately, has not gone away yet. Although we have seen a recent downward tick on interest rates, this particular challenge is still bleeding into 2024. So, now that we have reviewed the root of the problem in 2023, let's recap what some of the solutions were (and still are for this year!).
Some of the Solutions for Buying a Home in 2024
First off, and before we dive in to some of these solutions, I want to take a moment to say it is more critical than ever to work with a mortgage loan consultant you can trust. The complexities of this economy have affected how you get qualified to buy a home. I can't tell you how many times last year I spoke with clients who said they couldn't get qualified at their bank or retail mortgage lender, but when they came to me, I helped them find a way. Or, alternately, they could get qualified with their bank, but I was able to either find them a lower interest rate, and/or increase their purchase price so they could buy a home that actually met their needs. Okay, so now that we have covered that, here are some of the mortgage loan solutions to combat the root of the problem:
Adding an additional co-borrower. Sometimes, depending on the clients and their living situation, it made sense to add a parent or adult child as a co-borrower. In these instances, it helped increased the maximum purchase price for my clients so they could buy the home they needed. Sometimes it was an additional co-borrower who would be occupying the home and sometimes it was not. The additional co-borrower does not have to live with you at your new home, but, of course, this is a credit obligation that will go on their credit as well. So it is not a solution for everyone.
Down payment assistance programs. For some clients, they needed the down payment assistance to put additional monies down (besides their own down payment), so they could qualify for the home they need. Some clients I spoke with thought they could only get down payment assistance if they were a first-time homebuyer, and while that is true for most programs, there are some that do not require you to be a first-time homebuyer.
Looking at a buying a two-unit home instead of a single family home. For some clients, it made sense to buy a two-unit home, so they could rent out the other unit. This proposed rental income can be used to help you qualify for your home in some cases. As an important side note: this is allowed on FHA loans as well as conventional loan options.
Competition rate shopping. If you have only spoken with one or two banks, I highly recommend you speak with me. I'm basically a personal shopper for your home loan. I have access to many different lenders across the United States, and have helped countless clients find mortgage loan solutions that offer them a lower interest rate, which in turn means a lower house payment, which in turn can sometimes mean a higher purchase price, if you need it in your budget.
Niche loan products, such as home loans for doctors and other medical professionals. Yes, you read that correctly. There are home loans for medical professionals that are tailored specifically for these careers and how their income and debts are counted towards their mortgage loan approval. Plus, as a Florida mortgage consultant that isn't limited to working 8am-5pm with an hour break for lunch, I've worked with many Registered Nurses, Physician Assistants, Dentists, and more, who can only talk after business hours.
For homeowners preparing to sell a home in a year or two, but need to do some home improvements to get their house "sale ready," Home Equity Lines of Credit (HELOCs) are a possible mortgage loan solution. I've also had some clients use the equity from their home via a HELOC to renovate and improve it into exactly what they need, allowing them to remain there longer.
The above solutions are a short and fast list (like a rollercaoster) and certainly not conclusive, but it hopefully gives you a very clear glimpse into the recent past and factual hope for the future. If you haven't talked to a bank or mortgage loan officer yet, then let's chat and see if we can find a mortgage loan solution that's best for you. I'm looking forward to a few other mortgage options in 2024, and in future stories on the Florida Mortgage Blog, we will take a deeper dive into each one.
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