NNY Q&A: The State of Mortgage Lending | Top Stories
NNY Q&A: The State of Mortgage Lending | Top Stories

The first time buying a home can be a scary proposition for some, and likely made scarier since the onset of the pandemic. During that time, interest rates were the lowest they have ever been, and since then, rates have risen back to somewhat normal levels. Loan Officer at Watertown Savings Bank Shelby L. W. Morgia has been with the bank for over 30 years, and she sat down with NNY Business to talk about the interest rates, what new homeowners can expect, and much more.

What are some of the changes you’ve seen with mortgage lending throughout your career?

Mortgage lending has grown substantially locally and for the borrowers’ needs over the last 30 years. There used to be just the typical conventional lending, 20% down, and then you’ll be able to buy the house. Since then, there’s been a whole host of programs, products, and grant funds that have come to light to help people obtain the dream of becoming a homeowner.

What differentiates Watertown Savings Bank from other lenders?

Not to be cliche, but we are the hometown local difference. We retain our servicing for our borrowers. So in theory, when you do a mortgage here with Watertown Savings Bank, I will be your loan officer, your point of contact. I physically have your file that I could go back to refer to at any time throughout the loan process, you don’t have to call a 1-800 number and talk to somebody in a call center that is only reading computer notes about you in your file.

Does Watertown Savings Bank offer anything for first time homebuyers?

Right now it’s up to $9,000, if they are qualified as a first time homebuyer, to be used towards down payment or closing costs towards the purchase of their home. We have conventional traditional lending that we do. We also have several products that are for people that are considering refinancing homes. We have home equity lines of credits, home equity loans, adjustable rate (probe) products for those programs and properties that may not meet typical guidelines. For example, if they’re an island in the middle of the St. Lawrence River, some people get a little nervous about lending on an island. How do we get there if we have to repossess that? We’re obviously able to accommodate that need.

What are some things first time homeowners should expect when getting their first mortgage?

It’s a process. And a good loan officer will help guide you through that process, but it is a process. I think they have to understand that it isn’t something that necessarily means that since you signed a purchase contract on Monday, that you will close on Friday; it doesn’t quite come together that quickly. There’s an application process that will be done, documents that will need to be gathered, proof of income, proof of assets. If you’re applying for grants, you will have to submit that application, and an appraisal will need to be done. There’s also an appraisal review, a commitment letter to lend that basically says the bank is in. Then we’ve got to tie in the attorneys to do the closing paperwork. It may seem daunting if you see the steps all listed out, but we’d like to think that, as your local bank, and the tools we have through online portals and emails and faxes so that it isn’t so overwhelming. We guide our first-time homebuyers through every step of the process so they’re comfortable in the process and know what they’re getting, and understand the process and how it’s going to impact them.

What do you consider to be the most rewarding part of your job?

Putting people in their homes, whether they’re first-time homeowners, retirement homes, or the home of their dream. But the most rewarding part is helping people accomplish the dream of homeownership and Watertown Savings Bank has been here long enough that not only are we fortunate to not only help grandparents, parents, we’re at the point where we’re doing the kids as well. So, we get to know our customers and the families and I’m at the point now ‘okay, I remember when you were the toddler in the room when your parents were doing the house and now 20 to 25 years later you are purchasing your first house.’

What does that mean to you to be able to grow with the families that you’ve been helping throughout your career?

It’s an honor and a pleasure. Very few loan officers, especially from the big banks, get that opportunity. They’re filtered through a call center, they’re not there long. Watertown Savings Bank has longevity with its staff. Second to none in the county. It’s a unique privilege to be able to get that.

On the flip side of the most rewarding part, what do you consider to be some of the more challenging parts of your job?

Obviously, we try to get everybody their dream of homeownership. Unfortunately, not everybody is ready to take that step when they come to you for a variety of reasons. We try to make it not necessarily a negative. But although we can’t fulfill that dream today, we try to provide the steps so that they will be able to get there.

Are there any programs for people that elect to build their own home versus purchasing an already built one?

We do construction loans. You can do a construction loan from the ground up. We also do construction loans if you’re doing an addition to an existing home or renovating an existing home.

How do real estate values affect mortgage, interest rates, mortgages, etc.?

The real estate market is on an all-time high right now. We have been fortunate that many people in the area have taken advantage of that through the sale of existing property, buying into new property, downsizing, etc. As rates tend to increase, I suspect that some of that property value is going to start kind of backsliding in order to accommodate the interest rate risk, because if someone is qualified for a $2,400 payment with a 2.75% interest rate, they can afford a more expensive house than today’s current rate of 5.25%. So in order for people to continue to buy, prices are going to at some point need to start correcting themselves based on the continual increase of the mortgage rates.

What would you recommend people do to prepare themselves for a mortgage?

First thing would be to get a copy of your free annual credit report and to know what’s on your credit report. Several items impact your score and your ability to qualify for programs that require a minimum credit score. I would shop. I think it’s important that you not just shop and have people just randomly pull your credit so they can look at a score, but I think you need to shop for your bank. I think it’s important that when you’re doing a mortgage, you should be shopping for the overall relationship. Does the bank offer checking and savings online? Do they have automatic payments? What can they offer you as a borrower? Are they accessible? Do they return calls? Are you able to contact them? I think you should have a conversation with your loan officer.

What would you say to people who think that just because they have a $900 rent, that they can afford the $950 or even $850- $900 mortgage?

That could be true payment wise, but when you do a mortgage, there’s the cash injection, which often is the stumbling block for a first-time homebuyer going from an apartment into a home. There’s a downpayment requirement that varies from program to program, as well as closing costs if they’re not negotiated into contracts. We offer grant programs along with Neighbors of Watertown and Clayton Improvement Association to help first time homebuyers.

What are the key differences between a credit union and bank?

Generally a credit union requires a membership, you have to be a member of a credit union to be able to do business within a credit union for them to lend to you. There are several regulatory differences, but that really doesn’t impact the borrowers, per se.

Have you seen mortgage rates change or interest rates change since the beginning of the pandemic?

Yes, we’ve kind of come full circle, and then some. At the beginning of the pandemic, interest rates plummeted to historic all-time lows and stayed relatively flat through the pandemic. As the economy started to recover, so did the interest rates. The biggest increase has been the first quarter already of this year and we expect them to continue to increase.

What would you consider to be a good interest rate?

Interest rates have run the full spectrum. Historically, interest rates have been as low as 2.5% and as high as 13%. So a good interest rate is somewhere in the middle.

Do you have a timeline on when you would think rates would be like it was before the pandemic? Is there any thought in your mind or when we could be back at that point?

I don’t because we’re really unique here in the north country. We’ve been fortunate that the housing market is very strong right now. We have never been impacted by some of the prior things; the mortgage busts that happened where everyone’s property values plummeted. We had some corrections, but we kind of held fairly steady. We have river and lake properties that seem to be insulated from any major corrections. Limited supply, high demand as well as people that have decided to relocate out of the big cities after the pandemic or during the pandemic because everybody works remotely. We have benefited from people migrating back to our area. When the pandemic hit, people were coming home and coming because our property values were good compared to rent in New York City. For a two bedroom flat, they could be purchasing a house on the lake and have their own plot of land. I think we will see a marginal correction in the market with the values, but I don’t think we’re going to see a severe runoff.

Have you guys seen an increase in people coming up from the bigger cities?

We have. We’ve seen quite a few people that have either permanently relocated, or decided to buy a second home. So if the city shuts down again, they have a place to move to.

What do you anticipate interest rates will look like a year from now?

If we listen to the projections and what everyone feels, where rates are going to help stall this inflation and to help bring the economy back, we are probably looking at 2% above where we are today. I don’t know that it is going to be quite that high. They want to curb the inflation but they don’t want to stall the economy either. So, there is that fine balance of ‘We bring the rates up, stall the inflation, but we don’t want to bring the rates up so high that no one can refinance, no one can build, no one can buy a home either.’ So, there is the happy medium that has to happen.

What are some factors in determining an interest rate overall?

We do not check credit scores to provide you a rate. So, the rate would be determined by the program that you are applying for as long as you qualify for the program. Whatever those requirements may be, you get the rate of the program, the best rate that we have available.

Is that different from what other places do?

It is different. Many of the competitors check credit scores, so the better your credit score, the cheaper the rate. The rate doesn’t differ if you’re purchasing or refinancing or cash out at Watertown Savings Bank. If you’re qualified for a long term fixed rate and the rate is at five and a quarter. Then that’s the rate you get.

What age do you think people should start thinking about buying a home and preparing themselves to get their first mortgage.

I think it’s an individual choice. It depends on where they are financially and what they’re looking for. Although borrowers may not want to pay rent, if your game plan is only to be here for two years, it doesn’t make sense for you to buy. For me to say that by 30, you should have your own home, I just don’t think that works in today’s world. Thirty may be way too early for some borrowers, and someone may have already owned their home for five or six years.

What are some programs Watertown Savings Bank have for people that are or were affected by COVID?

During the pandemic we offered several options on varying scales from total deferment of a payment to waiving of a late charge because the mail was a mess.

If there was one piece of advice you would give to somebody who’s about to buy a home, what would that be?

If it was a first time homebuyer, my advice would be just because I say you can afford the payment, really take a strong look at your finances. Also, it’s a 30 year commitment. Do you really want to strap yourself financially for that extended period of time? There are a lot of things that come up in life that are going to need to be addressed in the next 30 years. Some may not happen for years and you would be in a totally different financial situation. Some may happen the month after you close your loan. So even though you’re being told ‘We can lend you X amount of dollars’ when your loan officer provides you the breakdown of the principal and interest, the private mortgage insurance, the property taxes and gives you an estimated payment, can you sleep with that payment and that commitment for the next 30 years?

It’s impossible to predict the future, right?

Absolutely. But, you know, when we look at qualifying people, we try to do our best with using the ratios to not overextend anybody. But credit reports and paper don’t tell the whole story. I don’t know what your cash spending habit is, and without me not having that knowledge I may be putting you in a position way tighter than I realized that the borrower may want to be in.

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