Tom Rhodes is the chief executive of Austin-based Sente Mortgage, and he took time this week to talk lending, including what agents need to know about best helping their clients.
Houston Agent (HA): Average prices in Houston are relatively affordable, but there are areas of the city where homes are selling for more than $500,000, and other places where $1-million homes are common. How are these prices affecting Houston’s home market?
Tom Rhodes (TR): It’s a generally good sign for the economy – the result of supply/demand and a sign that the Houston market is still booming. Houston is not one home market, but really is comprised of several different submarkets. You can come here and buy an average-priced home, but it might be miles and miles away from the city or areas where you really want to be. Houston is certainly an affordable city, however, there are just really specific areas of the city that aren’t. Market prices are really dictating the market.
For many young homebuyers, the rising home prices cause concern about their ability to afford a home. However, they should know they have many options available to them and many great resources to help them through the process.
Over the past four years, we’ve seen price appreciation in Houston due to high oil prices. While in 2016, oil prices have been lower, but home prices have remained fairly steady. The demand for houses has remained good although in 2016 we’ve seen some areas in the higher price range that have slowed.
HA: What are the current barriers to finance that homebuyers should be aware of before applying for a loan?
TR: Homebuyers should be aware of their credit scores and how that impacts approval/interest rates. Prior to applying for a loan and actively in the buying process, buyers should save for a down payment and understand what they can afford.
In an area like Houston where there is a range of properties and submarkets, housing prices can reach several million dollars. Most young professionals that are first-time homebuyers want to live close to the city, and they’re looking at condos and townhomes with average sale prices of $700,000 to $800,000. We also know from experience that most first-time homebuyers need help with a down payment, and loan options with less than 20 percent down. Sadly, there just aren’t enough home jumbo loan options available for these first-time homebuyers. What they really need is an increase in the maximum conforming loan amount.
Jumbo loans have restrictive terms that don’t really work well for first-time homebuyers.
To calculate maximum conforming loan amount they do it on metropolitan statistical analysis average. Some of our suburbs are really the size of most small cities. It just doesn’t work.
HA: How can real estate agents help prepare buyers for the lending process?
TR: Customers today expect a five-star service and in today’s transaction, both agents and lenders play a role in the overall experience. The financial side of homebuying is complex and can be intimidating – and most consumers don’t have the financial acumen to ‘go it alone,’ they need a trusted expert and advisor to help them make a smart decision that takes into account their long-term financial goals. But agents can help. This is what they can do:
- Agents can make sure clients have contacted a lender ahead of the process so mortgage bankers can help them understand what they really can afford. If they don’t do this upfront, it can really create a stressful situation after they’ve already found their dream home. Encourage borrowers to do their homework.
- Agents should understand the importance of partnering with the right mortgage bank and finding the right mortgage banker – not all loans are created equal. Get the mortgage banker involved in the process early on. Homebuyers need to understand their budget and the type of loan that will best suit them and then start looking for homes based on those criteria, not the other way around. Encourage clients to start preparing before they’re actively in the buying process – start saving for a down payment, and understand what you can afford.
- With the new TILA-RESPA regulations, the new loan officer cannot require a borrower to provide income and asset documentation to the loan officer prior to having a contract on a property. However, for a pre-qualification to be accurate that documentation is necessary. A real estate agent can advise their buyer to provide that information once they’ve selected a mortgage banker. That will avoid costly surprises further down the line.
HA: What is the biggest challenge facing lenders today? And are you, and Sente, handling it?
TR: Biggest challenge is changing regulations. Changes have been fast paced and significant, since Sente has been involved with the state association, TMBA, as well as local mortgage banker associations to be on the forefront of these changes. We’ve spent untold hours informing all of our people, and to this point we’ve handled the changes as well as anybody in the industry.
The regulatory environment is ever-changing. TILA-RESPA Integrated Disclosure (TRID) really affects everyone in this industry. Our team dedicated almost a year to preparing for the new processes and requirements. This year has turned out to be one of the biggest industry-changing years since 2007, and while the new regulations are challenging to adapt to, our team has been great about adjusting to the new laws and rallied to comply with the new standards.