A Time of Great Concern — And For Potential Homebuyers, Great Opportunity

A Time of Great Concern — And For Potential Homebuyers, Great Opportunity

With South Carolina still struggling to stamp out the coronavirus and millions of people impacted by job losses and business closings, it hardly seems like the ideal time to buy a home. And yet, record low interest rates and other enticements make this a prime opportunity for those looking to buy a house — rather than just hide in one.

“Strangely enough, based on how the mortgage rate environment works, concern can create a great opportunity for optimal mortgage financing terms,” says Kimberly Branham, 2019 Mortgage Lender of the Year (loans over $400,000) for Synovus.

“Since bond yields are the foundation for most long-term mortgages, when uncertainty and concern are present, you traditionally see bond yields decreasing based on people or entities buying treasuries as a classic flight to safety. So when this happens, rates generally stabilize or decrease, creating better payment options for many. If a person is comfortable in their employment, then getting a mortgage in a time of concern might be a very good thing.”

That may seem like surprising news, given that sales of previously lived-in homes dropped 17.2 percent in April, according to a report by the National Association of Realtors, marking the largest single-month fall in nearly a decade. And yet despite the economic tumult caused by the coronavirus, listings are still attracting buyers, and the average on-market duration of 27 days in April was up just three days from the same month in 2019.

“I am being told by the Realtors in the Midlands that this is a great time for sellers,” says Shawn Daughtry, 2019 Mortgage Lender of the Year (loan volume $300,000-$400,000) for Ameris Bank. “The inventory is low and houses are moving at extremely rapid paces, and with multiple offer situations being very common.”

Lower rates, lower payments

But even though home sales prices are continuing on their upward trend, there are still deals to be had for buyers thanks to historically low interest rates. Interest rates are currently anywhere from .625 percent to 1 percent lower than they were before the pandemic, Daughtry says, which “will give customers great buying power resulting in lower payments, or the ability to afford more expensive houses without overstepping on their budgets.”

The interest rate drop applies primarily to conforming loans, which can be sold on the open market, as opposed to “jumbo” loans of more than $424,000, and whose rates are more dependent upon the lender. With the continuing volatility in the market, Daughtry says, the expectation is that the lower conforming rates will continue through the remainder of the year.

And even though the tax code was amended in 2017, there remain several tax benefits to home ownership. Most homeowners can deduct the interest paid on their mortgage, the money paid in property taxes, and any payments for

private mortgage insurance, which is typically charged when the buyer puts down less than 20 percent of the mortgage amount at purchase.

“We have always advised people to consult with their tax preparer to properly gauge any specific tax strategy with mortgages,” says Branham, based in Columbia. “However, most have the ability to use the mortgage interest paid on their home, or deduct similarly on an investment property, along with taxes and insurance — providing less possible taxable income.”

Deductions made due to mortgage interest and property taxes are often more helpful to taxpayers than the standard deductions allowed by the IRS, adds Daughtry, who works in Lexington. And even if the tax savings turn out to be minimal, “the equity that you build in a house versus paying rent is a no-brainer,” he says. “Why build wealth for someone else when you can start building your own?”

Maintaining personal space

Mortgage lenders are also making it easy to navigate the loan process at a

“Strangely enough, based on how the mortgage rate environment works, concern can create a great opportunity for optimal mortgage financing terms.”

— KIMBERLY BRANHAM, SYNOVUS

time when social distancing is advised and many people are cautious of being too physically close to others they don’t know. Electronic document signing software, online portals for transferring necessary documents, and even good old-fashioned telephone calls help prospective buyers secure funding while maintaining their personal space.

“The entire loan process has moved to remote processing of documentation,” Daughtry says. “Most customers are glad to handle their loan this way, and love the convenience of handling everything electronically. I do have some customers that still prefer to meet in person, and we are always glad to do so. The trend is definitely moved to a more streamlined process with the ability to handle everything paperless now.”

Although not every lender employs the same level of type of technology, most are able to use secure methods to process documentation online. The lone bit of business that still needs to be done in person is closing, because “many states or counties and lenders have not adopted the ability to close a loan remotely,” Branham says. “Witnessing and recording the instruments are still done with wet signatures. (Remote closings) could be the future, though.” u