Phil Shoemaker has a little tip for mortgage borrowers: do lots of comparisons before signing off on the bottom line.
Shoemaker is Homepoint’s president of arrangements, and his advice echoes conventional wisdom in the mortgage industry that comparing three or more mortgage offers can save you thousands of dollars over the life of the loan.
Homepoint is a Michigan-based mortgage originator who 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?
Shoemaker: Don’t shop around for your fare. Be sure to shop around for your mortgage rate. We track the rate difference consumers get between going through a broker and going through retail lenders, and there’s a pretty good spread. We find that borrowers can get one-eighth to three-eighths of a point better on the rate by using a broker. The reality is that lenders are forced to compete to win the broker’s business. This forces the lender to be as competitive as possible. Going through a mortgage broker is the best way to ensure you get the best possible rate. Brokers have the flexibility to go to multiple lenders and they can make sure you get the best combination of rate, product, price, and service. I may be biased, but I just think the brokers are going to offer borrowers a better rate.
Where do you see the rates this year?
Shoemaker: The prices are still very low. Fannie Mae, Freddie Mac, and the Mortgage Bankers Association all expect rates to go up, and this is supported by the facts. You cannot pour $ 6 trillion into the economy and not expect inflation to start rolling. At some point, we will see continued acceleration in inflation. And that will prompt, at some point, the Federal Reserve to cut back on its buying program, and rates will rise. The problem is, how do you match this with ongoing affordability issues? The bottom line is that rates are more likely to go up than to go down.
What advice do you give to a buyer trying to navigate this market?
Shoemaker: As with everything in life, it’s very easy to recover from your skis, especially in a market like this. Figure out what you can comfortably afford and set a budget. Despite the heat of the market, stick to your budget. Be patient and be methodical. You want to buy a house now, but in some cases you may have to wait a bit. Prices are going up, so you have to be very careful about what you can afford. It’s a very competitive market, but don’t stretch beyond what you can comfortably afford.
Considering the rate at which prices are increasing, it seems difficult not to stretch.
Shoemaker: Absolutely. The prices are at record highs, and they continue to increase month after month. It is talked about a lot in the industry – is it a bubble? Even though it might look 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 created the demand. People were qualifying for loans that they didn’t have to get. Today, people have all-time record savings. It really is a question of supply. So I don’t think it’s a bubble. If the prices go down, I don’t think it will be at a significant level. I still think if you can buy a house you should buy a house.
President Joe Biden has pledged a loan for first-time buyers. Now is the time to attract even more buyers to the market?
Shoemaker: I have mixed feelings. On the one hand, given the evolution of prices, it is useful to support first-time buyers. The # 1 way to build wealth in this country is to own a home. So I think it’s a good thing and I support it a lot. But I worry about the timing. You’re going to throw more qualified people on the demand side when you have a supply problem.