Housing and HomeFinancing: 2018 Perspectives – Andrew Leff, Bank of America

Technology

Between searching for properties to finding a home’s value, using digital tools to simplify the complexity of the homebuying processis fast becoming the industry standard for real estate professionals and consumers.According to an Accenture survey, one in five completed their mortgage purchase without using a digital channel at all – signaling an opportunity to offer a convenient digital experience while still acknowledging the ongoing need to have access to professional guidance.

  • This year, Bank of America will be offering its Digital Mortgage Application, which allows clients the opportunity to apply for a mortgage entirely via their mobile device or online.
  • The homebuying and mortgage application processcan be complex. Bank of America has been designing digital solutions that go beyond transactional digital tools,giving homebuyers easy access toseek professional guidance about their home loan choices.
  • Digital benefits are extending into the home building industry. The advent of smart home automation, coupled with the rising demand for new homes,isencouraging homebuilders to use robotics/artificial intelligence to enhance new home construction and keep up with consumer and industry expectations. Industry professionals predict that this integration of technology will lead to more sustainable homes.

Home Prices

While home prices nationwide are expected toslow, experts anticipate they will stillcontinue to riseby 4.1% this year.BofA Merrill Lynch Global Research economists anticipate a slight increase in home sales and home starts:

  • Look for a stronger recovery for existing home sales this year with sales up nearly 1.5 percent to 5.55 million.
  • New home sales forecast may increase to 650,000 this year.

Impact to Consumers

Despite the rise in home prices the past year, 86% of millennial homeowners believe owning a home is more affordable than renting, according to the second annual Homebuyer Insights Report from Bank of America.

  • Rising house prices generally encourage consumer spending and lead to economic growth. For homeowners, an increase in the value of their home can promptthem to sell their home, releasing more housing inventory to homebuyers.

Mortgage Solutions

  • People always have home financing needs. The main challenge faced by most first-time homebuyers remains saving for a down payment. Homebuyers concerned about affordability can look into down payment assistance options.
  • According to the second annual Homebuyer Insights Report from Bank of America, 47% of prospective buyers think they would qualify for a down payment assistance program; of those, 87% say they would take advantage of these programs.
  • Buyers may be able to qualify for options such as Bank of America's new Affordable Loan Solution™ mortgage, a loan that provides low- to moderate-income homebuyers access to a responsible lending product with counseling at affordable entry prices.
  • With a fixed interest rate, down payment as low as 3% and no mortgage insurance needed, the Affordable Loan Solution® mortgage helps creditworthy, modest-income consumers become homeowners.

Jumbo Loans

Rising home prices, growing confidence among lenders, low interest rates, and an improving economy are driving the trends behind the growth of jumbo mortgage loans.The number of jumbo mortgage loans originated by Bank of America in New York City and San Francisco in particular, have climbed more than 15% in the past 18 months in part due to the surge of new condo projects.

  • Bank of America has dedicated specialists to accommodate high jumbo mortgage loan activity in certain markets and guide clients through stricter underwriting rules.
  • Jumbo mortgages are available for primary residences, second or vacation homes and investment properties, and are also available in a variety of terms, including fixed-rate and adjustable-rate loans. A jumbo loan will typically have a higher interest rate, stricter underwriting rules and require a larger down payment than a standard mortgage.

Andrew Leff is the National Business Development Executive for Bank of America.

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