An Anonymous Interview with a Top Mortgage Lender
We sat down with one of the top five national home mortgage lenders at a large institutionalized bank to get the honest scoop on the home mortgage environment in NYC. Because some of the below includes information the bank doesn't want you to know, we’ve kept this person anonymous.
One of the hottest topics today is interest rate hikes. What will this actually mean for mortgage interest rates, and what do you estimate to be the increase in interest rates over the next 3, 6, and 12 months?
Interest rate movements can be unpredictable. Given current low levels and potential inflationary pressure, there is greater risk for rates to go up than to stay flat or decrease. Clients should be mindful of this risk and lock in as soon as they practically can.
Are interest rate increases bad, good, or neutral for the housing market?
Interest rate increases influence, but do not necessarily drive, luxury markets like NYC. As more first time homebuyers enter the NYC market, this dynamic will change, but even so, there is more likelihood that the rate market will influence different buying decisions (i.e price point or monthly carry tolerance) vs. whether or not to buy at all.
What is the most common consumer misconception about obtaining a home loan in New York City?
The most interesting misconception is that that the above collateral/"project” approval is a given. Collateral approval is when the bank approves the building in which the apartment is located. Collateral approval can often be more challenging than credit (buyer) approval.
How does the New York City home loan marketplace differ from the rest of the United States?
Everyone takes it for granted that you have that second layer of approval (see above), which completely distinguishes it from single family markets. There are cooperatives and condominiums that are only financeable with credit exceptions and, in some instances, are not eligible for traditional financing at all.
If you were someone in need of a loan (first time buyer, refinancing, second mortgage) what advice would you give this person to get them off to a strong start?
The key for anyone is to start the process early and not get behind the curve, because there is so much to learn and so much to do. The consumer can get run over if not properly prepared… and luck favors the prepared! The financing piece for first time home buyers should be entirely squared away before making offers on properties.
How do interest rates actually work? Are they set by the government, or by the bank, or by another institution all together?
This trips so many people up. Mortgage interest rates are not tied to any one index. They are set by the “Secondary Market” department of every bank. They are influenced heavily by the capital markets, the ebbs and flows of equity and debt, fed monetary policy (tightening or easing), and perception of where interest rates are going. There are pricing policies that are unique to every bank.
We hope we’ve asked all the pressing questions surrounding a home loan... but if we haven't, don't be afraid to ask us!
Have the changing interest rates effected the value of your home?