Phil Shoemaker has some advice for mortgage borrowers: do plenty of comparison purchases before you sign the bottom line.
Shoemaker is President of Originations at Homepoint, and his advice echoes traditional wisdom in the mortgage industry that comparing at least three mortgage offers can save you thousands of dollars over the life of the loan.
Homepoint is a Michigan-based mortgage lender that works with a nationwide network of thousands of mortgage brokers. Shoemaker spoke to Bankrate about the housing market and Mortgage rates.
What’s the Biggest Mistake Borrowers Make?
Cobbler: Don’t buy your price. Make sure you buy your mortgage rate. We keep track of the interest rate differential consumers get between a broker and a personal lender, and there’s a pretty good spread out there. We find that by using a broker, borrowers can get between one-eighth and three-eighth points better on the interest rate. The reality is that lenders are forced to compete for the broker’s business. It forces the lender to be as competitive as possible. A mortgage broker is the best way to ensure that you are getting the best possible interest rate. Brokers have the option to reach out to multiple lenders and ensure you are getting the best combination of rate, product, price, and service. I may be biased, but I just have a feeling that brokers are going to give borrowers a better interest rate.
Where do you see the share price development this year?
Cobbler: The prices are still very low. Fannie Mae, Freddie Mac, and the Mortgage Bankers Association all expect interest rates to go up, and that is backed by the facts. You can’t put $ 6 trillion in the economy and not expect inflation to start. At some point we will see a sustained acceleration in inflation. And at some point it will cause the Federal Reserve to slow down its purchase program and interest rates will go up. The problem is, how do you balance that with persistent affordability issues? The bottom line is that rates are more likely to rise than fall.
What advice do you give to a buyer trying to navigate this market?
Cobbler: As with anything in life, getting on the skis is really easy, especially in a market like this. Find out what you can comfortably afford and set a budget. Stick to your budget despite the heat in the market. Be patient and methodical. You want to buy a home now, but in some cases you may have to wait a bit. Prices are going up so you need to be very careful about what you can afford. It’s a very competitive market, but don’t go beyond what you can comfortably afford.
Given the pace at which prices are rising, it seems difficult not to expand.
Cobbler: Absolutely. The prices are at record levels and continue to rise from month to month. There’s a lot of talk about it in the industry – is that a bubble? Even if it feels like a bubble, I don’t see it as a bubble. In 2007 you had an imbalance between supply and demand because the industry itself generated the demand. People were getting qualified for loans they couldn’t get. Today people have all-time record savings. It is really a supply side problem. So I don’t think it’s a bubble. If prices go down I don’t think it will be at a reasonable level. I still think if you can buy a home you should buy a home.
President Joe Biden promised a loan for first-time home buyers. Is now the time to bring even more buyers to the market?
Cobbler: I have mixed feelings. On the one hand, given the price trend, it is helpful to support first-time home buyers. The # 1 way people build wealth in this country is by owning a home. I think it’s a good thing and I really support it. But I’m worried about the timing. You will be laying off more skilled people on the demand side when you have a supply problem.