This spring promises to be an especially aggressive home buying season that could make things more complicated and confusing for beginners. To prepare you for what’s going on out there, Bankrate spoke to Darrin English, Senior Community Development Loan Officer at Quontic Bank. He specializes in helping people in low-income and low-income communities become homeowners.
The interview has been edited for length and clarity.
What are the current conditions in the real estate market and what do they mean for first-time buyers?
We are in a situation where there is a lot limited inventory for first time buyers. House prices are at their highest point. Real estate moves in ebb and flow, and right now we are at the height of the market. We have a situation in which 10 families can fight for a house. Things like debt removal and other negotiation tactics cause sellers to select a potential buyer. It’s a pretty aggressive market.
What are the best ways for a new buyer to assert themselves?
ON Prequalification is number one. You will need to be pre-qualified by a reputable lender who can provide proof that you have the assets required to make the down payment. Having the necessary assets and a really strong prequalification letter are key.
I always recommend that first-time buyers attend a webinar or seminar for first-time buyers. Here you can understand the buying process. You can hear from different credit institutions to understand which programs are best for them. If you can sign up online, you can often find these through your current bank or an online search for HUD-sponsored, not-for-profit webinars for first-time buyers.
Are there any support or other programs new buyers should know about?
Most people don’t understand that every bank has a community development loan program with their bank. There is usually a very small group of loan officers who can provide incentives for homebuyers. I could specifically talk about what Quontic Bank will offer. If you borrow compliant credit limits for the loan size from Quontic Bank, we will give the applicant 2 percent of the amount borrowed from them. For example, if you borrow $ 500,000 from Quontic, you get $ 10,000 to use towards your closing costs. When a bank grants an applicant, those funds can only be used for closing costs. However, if you receive funding from a government agency, you can use those funds for down payment and completion. These grants are very valuable for first time buyers.
Publisher’s Note: Read more from Bankrate about the first-time buyer Utilities.
What are the prospects for the market? Where do things go from here and does it get easier for first-time buyers?
The reason the market was so resilient is because interest rates were on you All time low. Now they are starting to move upwards. The compliance rates are now 2 and 7/8 to maybe 3 and 1/8. The latest review of incentives was enough to get the economy going to such an extent that Wall Street felt it needed to adjust rates. We expect these rates to rise dramatically in the next quarter. You could adjust loans to the 4 percentile. That could slow down shopping. We will be entering another phase in the real estate cycle. Foreclosures and evictions, there was a moratorium on both. Once enough people are vaccinated, you will see a lot more inventory at higher rates. This market will slow down and there will absolutely be inventory levels at lower prices for the next 12 to 24 months.