Hello, and welcome back to another episode of the Northwest Bank podcast. I'm your host, Luther Lampert. As we get into spring, the housing market starts to become more active. And if you are in the market for a new home in 2024, we've got some tips that may help you get ready to purchase your first or your next home. Joining me today is mortgage loan originator Ryan Schlabs.
Luther Lampert:Ryan works out of our bank in Omaha. He's got 17 years of banking experience and he's been with Northwest Bank for the last 7. He is married with a young son and daughter at home. He is a die hard self loathing Dallas cowboys fan, and he likes to get out and disc golf in his free time. He's going to be sharing with us his expectations for the housing market in 2024 and some tips and best practices to help you prepare for your next home purchase.
Luther Lampert:Alright, Ryan. Thanks for joining us today.
Ryan Schlabs:Hey. I'm happy to be here, Luthier.
Luther Lampert:Temperatures are warming up as we get closer, into the spring season, and that means the housing market typically starts to pick up again as well. Ryan, what are your expectations for the housing market this spring?
Ryan Schlabs:You know, Luther, I'm really expecting more of the same from what we've seen for the last, you know, 5, 6, 7 years here. It seems like, anybody that's looking at that purchase price point of $500,000 or below, there's a ton of people out there shopping in that range right now. From the real estate agents that we're working with here in our market, it seems like they're all seeing multiple offer situations as long as the house is priced accordingly, which is encouraging considering rates have gone up over the last 24 months. It's not really deterring the people that wanna go out and buy their first home or maybe upgrade to a little bit bigger home because of life events, so they're still out there shopping actively. We are hearing that the market above the $500,000 purchase price is softening up a little bit.
Ryan Schlabs:It's not the same situation where you see multiple offers a day a house goes on the market. It is below that point. However, the agents that we're working with do expect that to pick up as we get a little bit later into the spring season. That could possibly be because these are families that maybe have their kids in school, and they're not really looking towards the life events that are ahead of them yet. So as time goes on, as we get a little bit further in the spring market, we do hope and expect that to pick up a little bit more.
Ryan Schlabs:But one of the things that I'm really making certain that we focus on here, for our first time buyers, people below that $500,000 price point is getting them through the Northwest Bank, preapproval guarantee process, which I'll expand on a little bit later on. But that's really helping them in these multiple offer situations land the house of their dreams, especially in an environment that is gonna be probably a little bit aggressive throughout the spring for that price point.
Luther Lampert:You mentioned that rates have been up over the last 24 months. What do we expect the environment to do now, throughout 24?
Ryan Schlabs:You know, that's a question that's kind of tough to answer, and the reason why is there's so many factors that go into the rate environment and what's going to happen. We've heard from, you know, various supports out there that the, you know, Federal Reserve may cut rates throughout the year here, but that is something we're waiting to see. From sources that I found online, Fannie Mae, which is one of the secondary market mortgage investors, one that we use here at Northwest Bank, they predicted in January that we'd be at a rate of 5.9% at the end of this year. The National Association of Realtors at the end of December of 2023, they said they anticipate rates to be around 6 point 3 in quarter 4 of 2024, but then you get conflicting information. Goldman Sachs was reported by Yahoo.
Ryan Schlabs:They expect rates to stay in the sixes all the way throughout 2025. So the short answer is, really, things are day to day with interest rates. Really, the most important job of us in the mortgage role right now is to educate our buyers, talk to them about the process, and what could or couldn't happen with rates. But at the end of the day, you know, probably expecting more of the same, hopefully, with some drops going forward, but there's really no way to tell at this point in time.
Luther Lampert:So with so much uncertainty, what are some things that buyers should be considering if they're looking at purchasing and wanting to lock in a rate?
Ryan Schlabs:Yeah. So this is a conversation we as lenders have frequently. The most important thing to consider when locking in the rate as, you know, what are the big, quote, unquote, rate movers ahead of us, if you will? So, for example, you know, there's reports that come out come out on a monthly basis, about, you know, kind of the health of the economy. A big driver for mortgage rates is the consumer price index report, which is an indicator of what inflation is doing.
Ryan Schlabs:Another one on top of that is the jobs report as well too. Those kinda correlate directly with how mortgage rates are priced out. An example of kind of the unexpected happening is, you know, we kind of entered 2024 expecting rates to just kinda gradually drop throughout the year, but February's jobs report and consumer price index report came out, and they were stronger than anticipated, which ended up resulting in a rate spike, that we didn't see coming. Now those things are out of our control, so when we're meeting with clients and they're trying to consider what they need to do, they need to think about factors that the bank can't control. If they wanted to have the peace of mind of locking in the rate, they have that option.
Ryan Schlabs:If they wanted to kind of ride the process out and, you know, see what happens, maybe rates will drop. That could happen, but, again, we go back to February, and the unexpected occurred. So when you have that house under contract, considering your rate lock is really important because rates are day to day, minute to minute almost.
Luther Lampert:So as best practice, when is a good time if you're looking to purchase to lock in that rate? You know, that answer really is gonna need to be determined by
Ryan Schlabs:the borrower, based off those factors I just mentioned a minute ago. There is risk in not locking your rate right away. There's also potentially reward in not locking your rate right away if rates happen to drop. So, our job as a lender is to educate them on the things I just talked about on what could or couldn't happen. My personal story, my wife and I bought our house 8 years ago.
Ryan Schlabs:The day we got our house under contract, we locked that rate right away. Felt really good about it. And about a week later, rates dropped by about a quarter. So, we, if you will, didn't quote, unquote make the decision, but at the end of the day, we also had the peace of mind knowing that our rate was locked in if it happened to go up. So the the answer to that question is, what's most important to the borrower?
Ryan Schlabs:Do they wanna write it out and see what happens knowing that there is risk to that, or do they want the peace of mind to have that rate locked in and they can just focus on the process of buying their house going forward and relieve that one little bit of stress to a process that has a lot of stuff involved with it.
Luther Lampert:And rate is just one consideration in the entire home buying process. There's also other programs, that may be good fits for some buyers and maybe not for others. Can you touch on some of the different loan programs and products that are out there?
Ryan Schlabs:Yeah. Sure. Northwest Bank is a full service lender, in regards to the mortgage world. We offer conventional mortgages both through, Freddie Mac and Fannie Mae, which are probably the most common mortgage you see out there. That's your 15 year, 20 year, 30 year fixed rate.
Ryan Schlabs:We also offer the government programs as well too. So that would be your VA loan, so that would be for the veteran who served. There's different benefits to borrowing with that product. One of those is the veteran is allowed to do a 100% loan to values loan, which means, no down payment on that. There's also programs like, FHA, which is another government loan, which allows the borrower to put, a lower down payment on it.
Ryan Schlabs:There are some benefits and some downsides to the FHA program, but the FHA program is designed to help protect the borrower for safety and soundness of the property throughout the appraisal process when they're buying a home. But that's a good fit for some borrowers depending on their situation. One of the nice loan programs that Northwest Bank has access to is the Iowa Finance Authority loan and soon the Nebraska Investment Finance Authority loan. These are loans from the respective states to, help borrowers with potentially down payment assistance. These programs are aimed at helping borrowers in certain income areas achieve homeownership with advantageous pricing and benefits, so that's something that we really like to help our markets out with.
Ryan Schlabs:A couple things that are unique to Northwest Bank are some niche products that we offer here. One of which are, if we have a borrower that happens to be a physician, we can do a physician's loan form, which allows them to borrow up to a 100% of the purchase price, so a 100% loan to value, with no private mortgage insurance on there. We also have special lending programs for individuals that are looking to buy a second home or more commonly known as a vacation home. Those products in the previous years have been priced to reflect a little bit of a higher interest rate, and Northwest Bank has some options for people that are looking to buy that second home that, other banks do not have. And then we also have jumbo financing, which would be for the borrowers at a higher price point, that exceeds the conventional loan limitations, and new Northwest Bank has a unique programs for that as well too.
Luther Lampert:So there's a lot of great options. It sounds like regardless of of the size or or, regardless of the house that you're looking for, if you've decided that you want to move forward with purchasing a home this spring, what are best first steps? Is is it getting prequalified, or what should somebody do to start their home buying journey?
Ryan Schlabs:Luther, that's a great question. If someone is ready to start that home buying journey, I it is imperative to start the prequalification process. If you'd like to let Northwest Bank earn that opportunity, we'd love to help you with that. It's very simple. You just visit us atnw.bank.
Ryan Schlabs:When you arrive at that site, there will be a mortgage button on the top of the screen. Once you click that, you'll be able to find that button just below that says choose your mortgage banker to get started. The prequalification process is you soon as you start that application, the lender gets a notification that you are beginning to apply with us. As soon as that application is submitted, we're able to to work on that right away. One of the things I wanna recommend I wanna go back to the very beginning when I talked about our preapproval guarantee.
Ryan Schlabs:Northwest Bank offers an additional step to the prequalification process if you'd like to do it where we not only take your prequalified app, we take that a little bit further and truly send it through through underwriting. So we go through and we grab your documentation, like your income and your assets. The bank reviews this as if it was a true transaction with the house under contract. The underwriter lets us know if there's anything else we need. If not, we're able to issue you a commitment letter from the bank.
Ryan Schlabs:So what that means is we've done everything we can throughout this process to ensure that you're going to get a home unless something unforeseen, out of our control happens along the way. The reason why I like to do this is it really helps, especially the first time homebuyers, in situations where there are multiple offers on a home. If the listing agent were to call me, the lender, and say, hey. Tell me about your buyer. I can say they've done everything they can to get this loan, and they are, you know, green lighted from the bank, if you will, as long as something that we can't control doesn't happen here.
Ryan Schlabs:In my experience over the last 18 months, despite rates going up, there's still a lot of offers happening on these lower priced homes, and I have, a couple that I helped out last summer. They went from the month of March all the way through end of July, and they made roughly 25 different offers on homes. The home they finally were able to secure under contract was one where I was able to get the listing agent on the phone, explain this process that they've got the commitment from Northwest Bank, and they're living in their beginning starter home right now, at least for now, happily ever after, and they were entirely grateful for that process and being able to have that extra little bang there when the time came to finally get that offer accepted. One of the things that I truly love about the mortgage process with Northwest Bank is the transparency and the education that you're able to get from your mortgage lender along the way. Us being a, you know, regional bank, we have all of the ability to do what large banks can do, but we also have the community focus, which our clients truly love.
Ryan Schlabs:I'm available whenever you need me. I, you know, I have 2 little kids at home, but that's not stopping me from being able to respond to an email or a text for any concerns or questions you may have. When I bought my first home 7, 8 years ago, as I mentioned earlier, I had no idea what I was doing even though I'd been in banking 10 years already at that time. One of the things I take pride in as a mortgage lender and the rest of our crew does here too is making certain that our borrowers understand the process start to finish, and we explain and make certain that they are not confused, and they have the sense of a partnership that we're able to provide by being a local bank like we are. You know, some other lenders out there, they take the application.
Ryan Schlabs:You don't hear from your lender again, and you work with the processor the rest of the time, and you really don't know what's going on. With us here, your lender is the face of the transaction, and you can reach them whenever and get clarification. And whatever questions you may have, we answer, and we're happy to do so because, again, there's a partnership. We can't do it without you, and we're hoping that that allows you to truly value the services that Northwest Bank provides.
Luther Lampert:So there's a lot to take into consideration, and we have some great experts here at Northwest Bank who can help you out with that. So as you're starting your home buying journey either for the first time or, for the 7th time, please reach out, and talk with one of our experienced mortgage loan originators. You can find more information, as Ryan said, online atnw.bank. Ryan, thanks for taking the time to talk about the home buying journey with us today.
Ryan Schlabs:Hey. Thank you very much. I appreciate you having me.
Luther Lampert:Like Ryan mentioned, there's a lot of uncertainty surrounding the rate environment in 2020 4. So if you're not sure how to keep an eye on the rates, sign up for RateWatch and let Northwest Bank watch the rates for you. We will deliver the rates directly to your inbox daily, weekly, or monthly. Visit our website to sign up. Northwest Bank was just recognized as a 2023 top lender by the Iowa Finance Authority.
Luther Lampert:When you're ready to start the home buying process, reach out to our award winning team. Find the lender nearest you online atnw.bank. Thanks for listening today. You can find more podcast episodes on our website. Again, that's nw.bank.
Luther Lampert:You can also listen to us on Spotify, Apple and Google Podcasts, and on YouTube. Make sure you subscribe so you get notifications every time we release a new episode. Until next time. Thanks for listening. Northwest Bank member FDIC equal housing lender.