Written by Tina Kvavle, Product Marketing Director, TrustEngine
It is no secret that in the mortgage industry, as in life, change is the only constant. At TrustEngine, we closely monitor market trends, overall economic factors, new regulation and evolving technology to ensure we are providing the best strategies for our clients and focusing on the right innovation for the future.
We are pleased to share these key market insights and actionable success strategies.
Double Down with First Time Home Buyers
Home affordability declined in March¹, with the national median payment applied for by purchase applicants increasing 1.6% to $2,093 from $2,061, although contributing factors were mixed. Here are a few examples:
- (In case you’ve been on an island)...interest rates are volatile and high (the average 30 year fixed mortgage² rate was 6.98% as of May 2) .
- The median sales price for existing construction fell to $375,700³, down 1% year over year from March, 2022.
- And while housing inventory is expected to remain low throughout the year, new listings did inch up in March⁴ to 349,284 (up from 312, 196 in February).
With affordability a huge challenge, first time home buyers need your help! Did you know there are 14 first time home buyer loan programs and grants⁵ backed by the U.S. government that provide various levels of down payment or closing cost subsidy, reduced down payment requirements, and discounted interest rates? Plus, there are additional state-specific programs⁶ available across the U.S., like the California Dream for All program (launched March 27th).
TrustEngine clients can leverage these capabilities:
- Embrace life changes: Sales Boomerang Life Events alerts help you understand when key life changes make home ownership more compelling (e.g. marriage, new child, graduation, et al.).
- Provide much-needed education: Mortgage Coach Total Cost Analysis presentations are an easy way to boost confidence by demonstrating how affordable home ownership can be leveraging these first time home buyer programs.
Reach Out to Renters
Renters are discouraged overall - not just first time home buyers. According to a 2023 Borrower Insights Survey⁷, 73% of renters believe home ownership is currently out of reach, 53% believe you need over 10% down to buy a house, and 56% said they would even relocate to another state to afford a house.
But with rents rising about 6% in the last year and 17% the year prior⁸, depending on the geographic market, it might actually be less expensive to purchase a home!
TrustEngine clients leverage Mortgage Coach Rent vs Own and Cost of Waiting TCAs to help renters understand – both visually and by the numbers – how loan programs like adjustable rate mortgages and rate buydowns can produce a feasible monthly payment. TCAs can also demonstrate the long term financial impact of home ownership vs. renting.
Help Borrowers Address Credit Woes and Rising Debt
Following inflation, credit card debt rose more than $60 billion in Q4, 2022 to an all-time high of $986 billion, and the average interest rate clocked in at a whopping 21.6%, a jump from 18% year over year⁹. With increasing debt and payments, foreclosure starts increased 9% in March¹⁰ and other credit woes are sure to follow.
How can mortgage lenders help?
- Promote and leverage credit improvement: Turn-downs are not the end of the road. Connect borrowers who don’t qualify today with credit repair services, and leverage Sales Boomerang Credit Improvement alerts to monitor borrower progress, delivering the good news when borrowers qualify!
- Incorporate outreach on home equity capabilities as part of a “client-for-life” strategy: First, monitor your database with Sales Boomerang Cash-out alerts to understand debt and equity levels and know when borrowers are in need of debt consolidation, have the tappable equity, and meet credit guidelines. Then leverage Mortgage Coach Debt Consolidation TCAs to show the impact of different loan options on monthly payments and financial health.
About 80% of mortgages have a rate of 4.5% or less¹¹. While a full refinance could very well reduce overall monthly payments, a HELOC might be more appealing. Since many institutions don’t offer HELOCs due to the lack of a secondary market and other drawbacks, consider partnering with institutions who offer HELOCs to assist borrowers and preserve your relationships.
² https://www.forbes.com/advisor/mortgages/mortgage-rates-05-02-2023/
³ https://www.thestreet.com/housing/vanguard-home-prices-lower-2023
⁴ https://fred.stlouisfed.org/series/NEWLISCOUUS
⁵ https://homebuyer.com/learn/first-time-home-buyer-grants-programs
⁶ https://www.forbes.com/advisor/mortgages/down-payment-assistance-by-state/
⁷ https://www.icemortgagetechnology.com/explore/borrower-insights-survey
⁸ https://www.nerdwallet.com/article/finance/rental-market-trends
⁹ https://abcnews.go.com/Business/us-credit-card-debt-now-totals-1-trillion/story
¹⁰ https://www.blackknightinc.com/black-knights-first-look-at-march-2023-mortgage-data/
¹¹ https://www.stratmorgroup.com/home-equity-lending-opportunity-necessity-or-distraction/
