Wave of New Home Buyers

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Here’s some good news for a change. According to Zillow, in 2015 we should see a wave of new homebuyers coming from the ranks of current renters (Renters).

As more and more people are renting, for one reason or another, two things have happened. There are fewer affordable rental units and the rents for those units is rising; the rule of supply vs. demand.

With that many renters believing now is a good time to buy a home and put down some roots. Why? Because mortgage rates are still relatively low and home prices are very reasonable. The lingering question is for how long?

Will the Fed raise rates or continue to hold the line? That is the big question. However, a slight rate increase may not necessarily be bad. It could also help get some consumers off the docks and into the market, thinking they need to buy before the sea of rates rise even higher. Either way it goes, we should see home buying pick up through the rest of the year and that’s good for lending and the economy.

Are you prepared for this shipment of new buyers? The new fed rules, and secondary market demands for near zero defect loans, have changed the game. You must ensure your people are adequately trained to know what is needed and that they comply with the new laws while manufacturing a well-documented quality loan.

The new buyers will require some special attention as some will have had past credit problems and possibly short sales or foreclosures. Others will be the much talked about Millennials carrying high student debts with limited income and job experience. Still more will be in the low to moderate income range, with low down payments, spotty credit and limited home ownership experience. All will need to demonstrate the ability to repay the debt.

Each will require a different marketing plan, different products and a little different approach to lending. There may be some rough waters so it’s important to plan your route accordingly.

Regardless, it appears there will be opportunities to float more new home loans in the near future. When doing so, remember the new 4 C’s of lending; Credit, Capacity, Collateral, and Compliance. The devil is in the details. Check the decks and be sure you operation is ship shape.

With this influx of new buyers come great opportunities, challenges, and responsibility. It’s not just a matter of getting more people into homes, it’s putting them into the right lending programs to help ensure they have the capacity to maintain these homes and avoid sinking. In the long run, this will help everyone stay afloat.

Do you believe now is a good time to buy a home? Are you prepared to service the new breed of homebuyer? Is your ship ready to sail the 4C’s?

About the Author

Michael Vitali

Michael L. Vitali – Independent Consultant to the Mortgage Industry Mike Vitali is an independent consultant to the mortgage industry on matters concerning compliance and mortgage lending. He most recently served as the Senior Vice President and Chief Compliance Officer for LoanLogics, monitoring regulatory developments and their practical implications for the mortgage lending industry. His duties included research, interpretation, and analysis of existing and proposed legislation related to the industry in support of recommendations for policy and/or procedure changes to maintain continued quality and compliance with all applicable laws, rules and regulations, investor requirements, and standard mortgage practices. In his more than 40 years in the mortgage industry, in senior level management, he has gained experience in all areas of mortgage lending, risk management, and compliance. Mike is a past President of the MBA of Greater Philadelphia, is a charter member and was the second Chairman of the MBA of Pennsylvania, and a past board member and Legislative Chair of both associations. He is a recipient of the 1998 Mortgage Banker of the Year Award from the MBA of Greater Philadelphia, and the 2003 Chairman's Award from the MBA of PA, and currently serves on several compliance related task forces for MBA.