National home sales are down slightly in recent weeks despite some innovative lending ideas for home buyers. None of it signals a big upheaval in the market to Dan Vessely, President of Iowa Bankers Mortgage Corporation, who says the home-lending market in Iowa’s seeing little change, and that’s a good thing. He says as in the rest of the country, mortgage rates in Iowa have stayed fairly stable.
Vessely says with the Federal Reserve increasing prime lending rates 14 times in the last two years, shert-term lending rates have gone up but the long-term rates have stayed fairly consistent. “Even though we’ve seen a little uptick in the longterm rates, and along with that, mortgage rates, they’ve been very steady,” Vessely says. The U.S. Treasury has resumed sales of 30-year bonds and some analysts say it could mean some mortgage loans have a longer term of 40 and even 50 years.
Vessely says mortgage rates are based on the ten-year treasury note which has remained available and prevalent, so he doesn’t think resumption of a longer-term note will have a big effect. He says there are new plans in the market today including “interest-only” and adjustable-rate loans, but while they’ve been created to help get people into homes he says they’re not always in the best interest of the homeowner. There are many new facets to mortgage lending, but he says one risk is that people will set out to buy “more of a house than they can afford, longterm.”
The idea’s to get buyers into a home today based on the financing they qualify for now. But Vessely says in many cases, when you look at the longterm for that homeowner, it may not be in their best interest. New “interest-only” mortgages were designed to cope with fast-rising home prices, and let a buyer make payments that would keep them in a home but not pay down the principal at all.
After a few years of those relatively low payments, the plan changes and the payments increase so the buyer starts paying both principal and interest. The Iowa Bankers Mortgage Corporation doesn’t offer interest-only mortgages, Vessely says, saying only in rare cases would they be in the buyer’s best interest, perhaps only for someone wealthy with particular tax-planning needs, or a homeowner who knows their income’s going to go up very quickly over the years to come.
For those who want a home-loan they can handle, there is now a 40-year mortgage which may seem like a long time but offers affordable payments for the buyer. He says sometimes an agent may show people the house they’d like to buy, regardless of their ability to pay for it, but a buyer should find one they can afford with their present income and what they’ll be earning in years to come. The Iowa Bankers Mortgage Corporation offers secondary marketing for Iowa banks that are mortgage lenders.