ABQ Real Estate Talk #439. Unlock Your Lowest Mortgage Rates
This week we take a deep dive into the banking industry challenges, the Fed Funds Rate, and how they impact mortgage markets. We’ll explore how lenders are responding, and learn from the pros how to navigate getting a mortgage.
We also dive into how your credit score and debt-to-income ratio affect mortgage rates and how your financial situation impacts the interest rate on your mortgage. Learn about lenders’ criteria for approving loans and why credit score and debt-to-income matter so much.
Get the information you need to make informed decisions about getting a mortgage in today’s market.
It is Saturday morning and it is time for Albuquerque Real Estate Talk with Tracy and Tego Ventry. I said that so fast, Tracy.
You always do, but that’s okay. We know what you’re saying. Yeah.
We’ve been happily doing this show for many years. I think we’re on show for number 400. See, I lost track. 438, I believe.
We’re at. That sounds good. Sounds about right. Long time.
438 half hours of talking about real estate. We come here every week. We talk about what’s going on in real estate market in Albuquerque, real estate market around the country, tips and tricks for home buyers, tips and tricks for home sellers, and happy to share it every week.
And we’re on Kiva.
Yeah, kiva Radio. Kiva, 1600 AM and rock of talk. Com. So happy to be here. Tracy, we had a big week.
We did. We had some fun and exciting news this week. So we always say Ventury Realty group of, and now it’s inventory realty group of, real broker. So we have switched brokerages to Reel Broker, and it’s been a fun week with that transition.
Yeah. Change is always something. Sometimes it’s hard, sometimes it’s great. I think if nothing else, you grow out of it, you learn out of it, and we’re looking forward to it. So it’s a great opportunity for us to just continue our business and have some other tools that we may not have had in the past. So we’re excited about that.
Now, okay, Tracy, we didn’t prepare for this, but this past week was the GAAR, which is the Greater Albuquerque Association of Realtors. Do you have it with you?
You don’t even have it with you. It’s in my office.
In your office. Greater Albuquerque Association of Realtors does just like any association, they do an awards banquet every year and award different people for just what they’ve done. And there’s a couple of different awards. There’s Realtor of the Year, there’s Salesforce of the Year, there’s Sales Manager of the Year, and there’s a couple of other awards. But Tracy was the recipient of Sales Manager of the Year for 2022. Congratulations to that. The thing that’s cool about that award, I’m going to talk because it’s hard for the recipient to talk about it. But the thing that’s cool about that award, it was people on our team that nominated her and really spoke your praises on how you take care of business.
So congratulations. Thank you. It was quite a surprise at the awards ceremony because they don’t tell you in advance you’re an award winner. So it was a surprise. And then you have to go up on stage in front of hundreds of realtors and vendors and affiliates and say something. And I was totally unprepared and not my usual ready to talk in front of people. But anyway, it was really an honor. And a lot of our team members were there and I could tell they were really excited. So that was cool because it’s really all about them. Yeah. So let’s move on, T ego.
That’s just humbling. The one big news story this week, I think everybody’s been paying attention to is the bank stuff, right? What’s been going on in the banking world. And all of that trickles… Anything finance trickles into the housing world because anything finance related affects mortgage rates. And so it was very interesting to see how this played out this week. And the short of it is mortgage rates came down about half a point in the last 10 days since everything broke a week ago with the.
Bank stuff. It was like a week ago Friday, right? Yeah. I mean, it seems like a lot has happened in a week.
A lot has happened in a week. We avoided bank runs and financial system meltdown. That’s all that happened this week.
It is a wonderful life.
Yeah, exactly. Well, the thing that was interesting about it, though, is if you don’t really pay attention to it or you’re not really in tune with it is mortgage rates actually went down during this time. And that was because people went to bonds and bonds are what fund the mortgage backed securities. And when the cost of bonds go down, so do the mortgage backed securities and the mortgage backed security make the mortgage rates go down. Right.
Way too complicated for me.
Know. All I want to know is what’s my interest rate and It.
Is good news for home buyers. Mortgage rates have pulled back here in the last week after peaking out over seven. Now they’re back in the mid sixes. So that’s good news. And that’s good news for home buyers because we know there’s a lot of home buyers out there right now, Tracy.
We do. We’ve been busy. A lot of people reaching out looking for their new home. So we’re happy to help them and wish there were more homes on the market for them to choose from. But when we are ready and we’re working with them, we do a buyer consult, we get them making sure their financial strategy is ready to go and they know what to expect. They’re ready buyers and we really love to help them with their dreams.
So that’s we’re going to dive into. We got a couple of other stories first, but we’re going to dive into what a home buyer needs to be thinking about this spring. If you’re going to be a home buyer this spring, we’re going to give you all the things you need to know. Okay, not everything because there’s too much. But we’re going to give you a good overview of where to start and how to proceed with that.
Go ahead, Tracy. We’re not going to just talk about its daffodils popping up out of the ground and all of our trees are in bloom or apricot, and then it got snowed on and all of those things.
What’s up with that? Winter’s back. Oh, wait. That happens every year.
Yeah. I know we’re going to dive in, but I really want to talk about home of the week first. Right. Go for it. We have a home in Coming Soon status. It’s 839.9..
As the President of the Multiple Listing Service, what does Coming Soon mean?
It’s in our MLS available for realtors to see it, but it’s not yet available to the public to see on all those ancillary sites. You tell me, what does it mean? It means it’s not on Zillow.
About it. It means that it’s in premarketing status or pre ready to show status. It’s basically just an early marketing status that’s coming soon, meaning it’s not ready yet to be seen. That is something that if you have a property and you’re thinking of listing it for sale and you want to start getting the word out before you’re actually ready to be showing the house, you can do that. We do have that facility. You have 14 days from when you put it in coming soon to make it available to be shown. So that’s something to keep in mind.
So it’s in coming soon status.
I always have to go on the geek side, don’t I?
And it’s a really nice home that’s over 4,000 square feet, five bedrooms, two story backyard faces east towards the mountains. It has some lovely fruit, raspberries and different fruit there. It’s really beautiful. We did take photos last fall before winter, so we have the outdoor photos ready because we knew that it would be coming this spring. T hat’s really all we have so far is the outside photos. T hat’s why it’s incoming soon. Next week, we’ll get the photos of the interior of the house. So that’s part of it. But it’s $839,000. It’s on Grape View Court, which is Northeast heights, up by Paseo, just east of Trader Joe’s area. Okay. So if you’re looking for a home, let us know. We can get you more information about that coming soon. Great. Okay. Let’s talk about getting ready for spring as a home buyer, not about Daffodils.
Yeah, for sure. So if you’re thinking about spring, there’s a lot of things you need to keep in mind. And of course, let’s start with the data, Tracy.
Let’s start with supply of homes for sale. Well, that’s data. That’s what I mean. It’s data.
It’s data. It’s data. Yeah.
Supply? The supply of homes in the Albuquerque area is much more than last year. The reality is, though, it’s much less than what we should have this time of year. Last year was just such an anomaly, you can’t compare anything to last year. And so, yeah, we do have more choices for home buyers right now compared to last year. Of course, prices are higher than last year, but there are more choices.
Sure. So what would you say would be some top reasons why someone might want to be a home buyer right now?
Oh, man. Well, where do we start with that?
It’s the typical, right? Yeah. Pride of home ownership. It’s a good time to start thinking about moving if you’re thinking you want to move during the summer when kids are out of school.
Well, and we do see most home pending sales happen in the next three months in a seasonal pattern. Obviously, it happens all year round, but there’s usually a surge this time of year, which is important for home sellers, too, that now is the time to get it out there, get it ready, and get it merchandised to sell.
Right. Why owning a home versus renting? We’ve talked about this a lot. We have rent and when versus own calculators where we could help somebody that might be thinking, should I be renting instead of buying?
There’s always financial reasons in the sense that you do a comparison, what’s the cost to own? What’s the cost to rent? And for the most part, somewhere around two years is your break even.
Two years of being in a purchased home is where the break even is over being a renter.
Just from a pure financial standpoint, just dollars and cents only.
So if someone’s moving here just to work for a year and then they know they’re going on to another location, like somebody we know that’s working at Intel right now that is contract labor, they’re building the FAB, redoing the FAB. They know as soon as they’re done here, they’re moving to Chandler to do that FAB or whatever.
Might be the case where they know they’re not going to be here long enough for it to make financial sense for them to buy a house.
Yeah, for sure. The thing is, you always have to add in all those other reasons, the sense of security, a place to call your own, the ability to customize it and make it what you want, just the pride of ownership. Maybe that’s a little overplayed that whole pride of ownership thing, but it is a thing. Just the sense of accomplishment for being a homeowner. So all those things matter.
Yeah. A lot of times when you’re in a rental, especially if it’s a single family home rental with a yard, how much do you want to put into it to put fruit trees or put a garden in? You don’t even know if you’ll be there to be the one that gets to harvest the fruit, right? So there’s a lot of joy in the ownership and making it your own, both inside and outside.
Let me address one of the elements in the room in the housing market right now, which is home prices have gone up substantially over the last couple of years. All the pundits are saying there’ll probably be a recession sometime in the future. It hasn’t happened yet. That may create some fear on, Okay, should this… Was this a good time to buy? Is a good time to buy? One thing that’s really interesting in just about every recession, except for the great financial crisis of 2008, ’09, home prices generally go up during recessions, which is interesting.
I bet if people wanted to see a chart for that, they could send us a message and you could get them a chart on that. I got a.
Chart for that.
I knew you did.
There’s a bunch of charts for that. There’s a lot of people that have reported on that. And it’s all sources.
You can go back a long ways and see that historically when there’s a recession.
Home prices either stay flat or go up. Or go up.
Which is counter intuitive. It is. For us to even say that it doesn’t sound right, but that’s what we’ve seen.
But the great financial crisis or the housing crisis or whatever you want to call it of 2008, ’09, that whole.
Time period. I was thinking 7, 8, but okay. It went on.
Well, yeah. Really, everything came crashing. Get that term, in ’08 is really when it really hit. But that’s the other one thing I want to say. Anybody trying to say, Oh, it’s ’08 all over again because home prices went up just as fast as ’08. That’s the only thing that’s similar. Everything else, the amount of equity homeowners have in their homes, the level of inventory, we’ve already talked about that, very low compared to then. Just the balance sheet of homeowners is much stronger, and we don’t have exploding mortgages or AR arms. I call them exploding mortgages, basically. It’s like you get this super low teaser rate, and then a couple of years later, you have to go up to this higher rate. Those went away. All those crazy financial products that were available back then in ’04, ’05, ’06 that set us up for that problem, those things are gone. The financial situation of current homeowners is very good right.
Now. yeah. Okay, next. We’re solid there. Next, pre approvals in 2023, what we need to know?
Probably as important or more important than ever. I mean, us as the realtor community, people that are realtors and real estate agents and loan officers understand that it makes you a cash buyer, right, Tracy, if you have a.
Pre approval letter. It does. And we’ve talked about this on our… Our listeners know that using a local trusted vendor who has a reputation to uphold is really the best way to go. When we are competing with other buyers to get that house that just came on the market, when you have some an online or out of area vendor, or even a big bank without a mortgage present locally, it can hurt your offer. It’s like having a local vendor that other agents know and go, Okay, good. We’re going to give a little extra weight to that.
It’s important. Let me just clarify something. I mean, if you are a home buyer and you’re going to be getting in this market this year, it is going to be competitive for great homes. They’re in great areas that are in popular areas that are priced to the market.
It’s going to be, and it already is, competitive in all types of homes. If home isn’t a great home and not in a great area or on a great street, if it’s priced for the market, there’s still competition for.
Those homes. You compensate for a bad location in bad condition of the home by price, right?
But let me address just one thing there. I want to make it clear, that’s not all prices because our median price now in Albuquerque is somewhere around 330,000, for example. Homes under that median that are in desirable areas, those are the ones that are going to have the most demand. As you get up in price, obviously, there’s just not as many buyers in the market in that 800 and above, for example.
Right, for sure. Let’s go back to pre approval in 2023. There’s pre approval and there’s pre qualified. Yes.
What’s the difference?
That’s my question to you.
No, my question to you. I’m going to throw it back at you. I’m going to let you answer that one.
Pre approval versus pre qualified. So pre approval in my mind means based on generally what you told us, it appears as though you’re qualified for a loan. Pre qualified to me is stronger. It means you’ve put in a mortgage application with the lender, they’ve pulled your credit, you’ve supplied some of the data, your taxes, your bank statements, your paycheck stubs, a few of those things to support what you’ve already told them, and they have verified some of those things. So when they give us that letter that’s pre qualified, it gives more weight to the credibility that you can afford the price or the terms that they put in that pre qualified letter.
Let me throw a term out there underwriting. We hear that in insurance, but we also hear it in mortgage and any type of loan application. Not all underwriting is the same, correct? What I’m getting at, there’s different levels of it.
There’s different stages of underwriting.
It could be an automated underwriting or it could be a hand done by a human being underwriting. But somebody that’s gone through at least some preliminary underwriting on their mortgage is going to be in a much better status. And if they do that with their lender and they include that with their pre approval letter, that does give that pre approval letter more weight.
Pre qualified, yes.
Yeah, pre qualified.
True. No, pre approval.
Pre approval. Yeah.
I know. That’s the point. It’s like these terms are all mushy. I guess what we’re getting at is you want to make sure that lender letter, the letter that you get from your vendor that says, Hey, you can buy this home is as strong as it can be, which means you might have to provide some financial information up front, but you should do that if you’re getting in a competitive situation. Totally.
So let’s talk about things to avoid when applying for a mortgage and when you’re in the process of looking for a home or under contract on a home. I can think of several things. I know this wasn’t on the agenda, but… Oh, my gosh. Don’t close accounts without checking with your lender to make sure because some people think their credit score is going to get better if they go in and close maybe a credit card or pay off something or whatever. Don’t do anything unless you’ve talked to your lender.
About it. Yeah, definitely. Closing out loans, paying stuff off, moving money around between accounts.
Closing accounts. Bad. So closing accounts, especially if something’s had a long history of you paying it regularly and then closing it could really hurt your credit, right? Yeah. How about going and opening a credit card at Best Buy to get the new appliances for your kitchen? Yeah, no. A washer, dryer, fridge. Yeah, no. Don’t open new credit, right?
A new car, a new truck.
That’s where I was going next. Go buy a new vehicle and put it on credit?
Yeah, there’s some great things about out there that lenders put out that the Ten Commandments of Mortgage, the don’t do’s of mortgage and stuff like that.
Right. And lenders usually go through that with you when you start the process with them. So just a sidebar here for us.
And Tracy, I just want to remind everybody is Tygo and Tracy Venturi with the Venturi Group of real broker. Real Broker. I’m going to have to pause because we’ve changed brokerage and think about that for a second. But if you want to reach us, we’re at 505 448 8888.
And we’re always happy to be here on the Kiva on Saturday mornings. We are. It’s a great thing for us. We love to talk real estate. You said at the beginning of our show, Tego, how we’re like a half hour talking about real estate. And I thought, yeah, we talk about real estate all the time. Well, I know. But it’s something we love. We’re passionate about, and we love to share our knowledge about real estate.
We talk about it publicly a half hour every weekend. Yeah. So we’ve been talking about home buyers and what home buyers should be thinking about. And if you’re listening to this, you’re not a home buyer. Well, and you run into somebody that’s thinking of buying, share this information with them because educated home buyers is important. We see many times people jump into it and they just don’t even know where to start. We’re here to help people and educate. Many times we’re called real estate salespeople, but really, we’re educators. We’re consultants, and that’s what we want to do. Facilitators. Facilitators, yeah.
I’m going to jump back into things to avoid after applying for a mortgage.
Oh, you got more.
Don’t change bank accounts. Oh, yeah. Don’t deposit large amounts of cash into your bank before speaking to your lender or your bank. So that’s an interesting one because there are a lot of people who don’t keep all of their money in a banking institution. And we actually went to a house once where they wanted us to just take a bunch of cash.
Notchers money? Yeah, notchers money. I don’t remember if it was for their earnest money or something. And we’re like, title companies won’t take cash. But also be careful depositing it because there’s that rule, if you deposit over 10,000 cash, you’re going to get audited, right?
Where did all that? Well, yeah. Any money in the account when you’re applying for a mortgage, you just have to document where it’s coming from. Because what they’re trying to avoid, especially if somebody is really tight on down payment and stuff, they can’t receive a loan. So if somebody says, Hey, I’ll give you $10,000 and you just pay me off later, do it on the side. That’s not allowed unless it’s somehow documented because they have to show that you have a debt.
And one other, don’t co sign for any other loans. And obviously, if you are a co signer for other loans, you would put that on your loan application so that everything can be dealt with. Make sure you put everything you can think of on that loan application that might come up along the way. But the best plan is to talk with your lender and work with them very closely on everything. Anything you might want to move money around, open credit, move something, close something, talk to your lender first.
Okay. We beat up the lending thing in the lending process. And I think there’s a reason we spend a lot of time on it because that’s usually where the breakdown happens because shopping for homes, looking at homes online, looking at homes and touring homes and open houses and all that stuff, that’s the fun stuff, right? And sometimes the financial piece and getting all those ducks in a row can create issues. So, Tracy, once… Okay, what were you going to say? Well, I.
Was going to say one other thing in this whole process is planning for your down payment.
Oh, we’re back to money again? Yeah, sorry.
But planning for your down payment. So credit score and how much you’re going to put down can make a big difference in what type of loan you’re getting. And sometimes you might have somebody who wants to gift you some money so that you have more down payment to help offset something. And again, it’s tough with your lender, but finding your down payment as well as closing costs. A lot of times we start working with someone who hasn’t bought a house before and they’re thinking down payment, but they’re not thinking about the other costs involved in buying a house.
Okay, let’s just run through this real quick. So down payments can be as low as…
As nothing, VA loan.
If you’re VA.
Or 500 out of pocket. We have a program we’re going to talk about in a few minutes that’s for a down payment assistance program.
But for the most part, FHA loans are 3.5 %, you can get conventional loans that are 3, 5, 10, 20 %. And the reason I say that, and I think people that listen to us know this, but there’s a myth out there that people need 20 % down. And that’s a very rare occurrence, actually.
That’s an archaic thing really these days.
Yeah. So it’s the down payment, but then you’re also going to have some closing costs. You have to prepay for insurance, you have to prepay for some taxes potentially, and you’re going to have some other costs related to putting the loan together, right?
Right. Exactly. Like, maybe the inspections on the property you’re going to be paying for.
So think about maybe what, 1 or 2 %, maybe? Yeah.
Yeah, something like that. Depends on the purchase price, of course.
Tracy, before we jump to that story, I just want to wrap this up. If somebody, again, is thinking about buying this spring, it is going to be a busy market. It’s already looking that way. You need to be ready. Again, like I said, the shopping for homes online and looking at all that, that’s the fun part. But you got to get those other things in row because you don’t want that home to pop up one day on your Zillow search and you go, Oh, my gosh, I need that home, and you haven’t got that other stuff ready to go and it could be gone, right? Right.
So give us a shout if you’re interested in us helping you set up a home search or whatever you need to do.
Okay. There’s a program coming out, not until March 27th.
So this is brand new.
Brand new, hot off the press, very significantly hot off the press.
Not until, that’s just 10 days.
From now. It’s called Home Forward. It’s a new program for non first time home buyers.
Wait, this is through the New Mexico…
New Mexico Housing Finance Authority.
New Mexico Finance… Finance…
Housing Finance… What’s the word? Mortgage Financing Authority.
Housing Finance Yeah, MFA is what we always call them, right? Yeah, Mortgage.
Finance Authority. The Homeownership Department. So it’s called Home Forward. It’s a combination of a first mortgage loan and an optional down payment assistance, second mortgage loan. And it is available to non first time home buyers as well as first time home buyers who may not meet the guidelines for the first home bond program. So without going into all the.
The details, that means there’s one more option out there of how to get help with your down payment to be a home buyer. Obviously, there’s income limits. This is not for the high income earner. This is to help people get into home ownership. And it’s awesome that we’re going to have one more avenue to do that.
It’s good. There’s been a lot of conversation in the political world about the housing shortage in Albuquerque, the housing shortage in the country, really, in New Mexico and the country in general. I’ve seen data that says we’re a million to anywhere from 1 million to 6 million homes short in the United States, or housing units that could include rentals as well. But affordability has been a big conversation because a lot of people got priced out of the market because of the rapid price appreciation we had from really the end of 2019 all the way now through till today. It has slowed down in the last quarter or so, but that one year we had like 17 %, 18 % price appreciation. But what I wanted to talk about real quick was affordability. That’s been the big question or big comment is, what do we do about affordability? Affordability is getting out of whack. Affordability is out of whack. It’s tough. Our affordability levels are at the lowest we’ve seen in a really long time. Meaning when we talk about affordability, it’s okay. How much income do you make? And what’s the cost of home ownership?
What portion of that income would go towards your home ownership, right? Yeah.
And so I did some searching. National Association of Homebuilders does this really great analysis where they break down 230 markets in the country, 230 different areas, and they put a ranking on that market for affordability. They look at both the cost of housing, cost of taxes, all that stuff, as well as what the median income is for that market. So it depends. So it’s not just pure cost. And the bad news is it’s not very good. The bad news is it’s as bad as it’s been in a long time. The good news is Albuquerque is one of the better.
Yay. We’re more at the top of a good list.
Yeah, exactly. In the sense, now, we rank 126 out of 235. So right in the middle. That doesn’t sound good. You got to understand, most of that 120 is east of the Mississippi. You start going west, us compared to Colorado Springs, which is one of our comparable markets, we’re much more affordable. Dallas is another market I don’t know why we get compared to, but we do we’re much more affordable. El Paso, get this. Now, El Paso’s housing costs are quite a bit, not quite a bit, but are less there here than Albuquerque. Let’s see, give you an example. So El Paso, 243,000 is the median price based on this data, and Albuquerque is 300,000. So our homes are more expensive. But when you look at it from a median family income, Albuquerque comes out better because we’re higher than that. Phoenix, we’re way better. San Antonio, another market we get compared to sometimes for some reason, we’re better. T uson, which is probably the most comparable market that we hear about, very similar. Well, El Paso and Tusson are very similar size to the Albuquerque Metro, and we are more affordable than both those markets. Obviously, we’re more affordable than most of the California markets, too.
Totally. Okay, it’s not great, but better than most.
Totally. So we’re coming to the end of our time here today. I just want to remind everybody, we do have several houses that were newly put on the market. So if you’re interested in new houses that have hit the market, give us a call 448 888 88. And if you have things you want us to talk about, let us know that too. We’re with Reel Broker and Tego and Tracy. We’re always happy to be here on Saturday morning with you to share real estate. And if you want to.
Get market updates, follow my YouTube or follow our YouTube channel. I’m always putting market updates up there. Just try to do some shorts every week, like on Monday generally is when I do it just to give a quick look at the market. So if you’re in the market, either buying or selling, they’re a great way to just get a sense of what’s going on from week to week. So it’s Venturi Realty Group, and you can find us on YouTube as well. Great.
Thanks, everybody. Have a good day.