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 Message from our Chairman 

 

Dennis Nixon

Texas and Oklahoma are seeing increased home activity with new subdivisions being built and others selling at higher price points. Summer marks the start of the heavy buying and selling season. In the past several years, owning a home has become more affordable with interest rates remaining historically low.

Right now, consumers have increased buying power due to these low interest rates, but these rates won’t last forever. Time will tell, but they will eventually go up, and quite possibly by the end of the year. Higher interest rates will reduce consumer-buying power.

Despite the excellent opportunity afforded by low interest rates, over the past several years, the homeownership rate in this country has trended downward, according to the U.S. Census Bureau. Many consumers have opted to rent because of a perception that renting is more affordable. Additionally, many first-time home buyers believe that they would not or could not qualify for a mortgage loan as they do not have the required down payment saved. This too is a misconception as many customers can in fact qualify for a low or no down payment home loan.

Take a look at the rent vs. buy comparison.

In Texas, rent for an average three-bedroom apartment is $1,170. The average mortgage on a three-bedroom home, including principal, interest, taxes and insurance is $1,215. Out-of-pocket cost for the first month rent and security deposit for an apartment can be comparable to what is needed to purchase.

Even factoring in the down payment for a home, purchasing is the most affordable option right now. The idea that securing a home requires a 20 percent down payment is a misconception. We offer several home loan solutions that require little to no down payment, including a first-time homebuyer program and federally-insured FHA financing, which require a 3 percent and 3.5 percent down payment, respectively. Customers looking to purchase in a rural area may pursue the USDA program, which requires no money down. Our brave men and women who serve or have served our country also have a 0 percent down option with a government-ensured VA loan program.

In any case, there are important steps you can take to ensure success with the home buying process. First, understanding what you can afford is vital. Working with a lender to get pre-qualified will help you determine much home you can afford. A local lender, such as IBC Mortgage, provides consumers with the advantage of working with a company that truly understands the local market.

You may have heard the adage that real estate is local. Well, it should be the same for mortgages because local underwriters know that market and the value of that neighborhood.

IBC’s biggest advantage is that, as a community bank, our commitment is to service local customers and not hand off accounts to another company. We serve as our customers’ go-to financial resource, an important distinction when considering that, for most people, a home is the most financially significant purchase they will make in their lifetime.

When considering how much you can afford, we’ve found that today’s consumer has a different, more responsible approach to finances. Rather than finding a house and figuring out if they can afford the payments, today’s buyers tend to look first at how much of their monthly income they are willing to spend on housing and what they actually must have in a home. That tactic can help to prevent financial problems that can result from overbuying.

Working with local real estate experts and underwriters, there are few investment opportunities that can match or surpass the financial benefits to owning a home. But, keep a close eye on interest rates. Once they begin rising, the outlook for this financial opportunity will start to weaken, as consumer-buying power diminishes.

Dennis Nixon is CEO and chairman of the board of International Bancshares Corporation and International Bank of Commerce.