10 Things to Look Forward to in The World of Mortgages in 2023
By: Scott Nadler
I know what you’re thinking, and I completely agree. I can’t believe it’s already 2023. And I don’t know about you but 2022 was a wild year for me and the entire mortgage industry. For the vast majority of my 12 years in this business, I’d typically go to bed at night with the possibility that interest rates could swing up or down by at most .125% to .250% the following day. That was the norm. In 2022, however, you could wake up with rates changing by almost a full percentage point. These wild swings made it really difficult for home buyers to budget for a purchase and for several months last year it pushed prospective home buyers into “wait-and-see” mode and onto the sidelines
All of that is thankfully, now in the past. As we enter a new year, there are many bright spots for those looking to purchase a home in 2023. And as we all get inundated with 2023 top 10 lists for favorite destinations, best Netflix shows, and most addictive apps (I’m trying to ween myself off Wordle), I thought why not put together our own top 10 list. So, without further ado, here are the top 10 things to look forward to in the world of Mortgages in 2023.
- Rates Are Stabilizing – last year was bananas (cue that Gwen Stefani song). Over the past two months rates have already come down by over .500%. And with the last two inflation readings coming in lower than expected and wages also coming down as reflected in the latest jobs report, rates are starting to follow. If you’ve read this column before you know that inflation is the main driver of interest rates, and with the FED taking every measure necessary to curb inflation, rates are poised to stabilize.
- New Loan Limits – the loan limits have increased which will create more opportunities for more buyers. To simplify things a bit (it’s slightly more nuanced than this but you’ll get the gist here) consider that there are two types of loans: jumbo loans and non-jumbo loans. As of this year, any loan amount up to $1,089,301 will be a non-jumbo loan. Any loan amount above that limit, will be a jumbo loan. There are different requirements, rates, and guidelines for these two types of loans and if you didn’t qualify for, say, a $1M loan in 2022 because your loan was a jumbo loan back then, this year you may since it’s a non-jumbo loan.
- More Products for Self-Employed People – From bank statement programs where clients only need to show 12-24 months of bank statements instead of their tax returns, our 1099 program for 1099 employees, and options for clients who only want to show a P&L, there are several options to help self-employed individuals get financing this year.
- More Products for First Time Homebuyers – Fannie Mae and Freddie Mac have made some adjustments to their requirements for first time homebuyers which will make things easier for them to get financing. If you’re a first-time homebuyer and your income is under a certain limit (this depends on the county), you may be eligible for a below market interest rate.
- More Products for High-Net-Worth Individuals – From asset depletion loans (using a formula to derive an income based on one’s assets) to a 2X asset deal (if one has two times the amount of assets in the bank relative to the loan size they’re applying for, we can approve them), there are special lending programs for high-net-worth people looking for financing.
- Time to Refinance? – For those with interest rates in the 7-8% range, there could be opportunities to refinance and lower their rate. One of the more over-played maxims in the mortgage business last year was “You marry the home and date the rate.” Well, if you’re not satisfied with your current rate and you think you can be happier and more fulfilled with a better one, refinancing may be in the cards for you.
- Covid is 3 Years Removed – Well, just about. And if one’s employment situation changed drastically or credit was impacted due to Covid, for many people, those issues are far into the past and will no longer be an issue in getting approved for a loan. There are many people that were simply waiting for the 2022 returns to be filed in order to qualify for a mortgage – and we’ve finally reached that point.
- Not An Election Year – one less thing for the markets to worry about, one less thing to create chaos and one less thing to create volatility. I can’t guarantee that chaos and volatility won’t ensue, but the fact that it’s not an election year, and Congress is split, that bodes well for more stability.
- Building Approvals – in addition to getting a client approved for a loan, for those purchasing a coop or a condo, banks must get the buildings approved as well. We dig into the building’s financials, insurance, budget, and many other factors relating to a building. After the Surfside Building in Miami collapsed in June of 2021, the requirements got stricter for building approvals which caused delays in getting loans closed. Now that we’re a year and a half removed from that horrific incident, buildings and management companies, for the most part, are fully aware of what banks need and the majority of buildings are meeting those requirements.
- Great Time to Buy a Home – with rates coming down and rents still being at elevated levels, coupled with home prices starting to come down slightly as well (depending upon the neighborhood) now could be a great time to buy. As opposed to 2022 where buyers had no clue what their prospective mortgage payment would be day to day, in 2023 buyers won’t have to deal with the same types of fluctuations.
And there you have it – our top 10 list for 2023. With the last couple of years bringing a ton of uncertainty into our lives; from Covid, geopolitical news, crypto, Pete Davidson’s girlfriend, etc., the financial markets were a roller coaster ride. The expectation is for their to be less volatility and therefore more stability to the markets as a whole, which means the day-to-day changes in mortgage rates will be far less extreme compared to last year.
If you have any mortgage related questions, please don’t hesitate to contact me.