Mortgages and Interest Rates Outlook: Q&A with Lee Hamway

Featuring Lee Hamway Managing Partner, LM Mortgage Consulting and Advisory Services

The Bottom Line was excited to interview Lee Hamway, Managing Partner at LM Mortgage Consulting and Advisory Services. Lee is a veteran mortgage professional, specializing in simple and complex real estate financing transactions.

BL: How important is a person’s credit score when applying for a mortgage and what are remedies if the score is less than exemplary?

• LH: A good credit score can be the difference between a loan approval and a loan denial. A great credit score can help to bring down the interest rate on a loan. It is always recommended for a potential borrower to run their credit score before finding a property. This gives ample time to fix any credit issues that may arise and helps to boost the score that will be used for underwriting. One common way to improve a credit score is to pay down credit card balances (even if the balance is normally paid in full each month.) In addition, many times, there are errors on a credit report. Careful review of your credit report and cleaning up any mistakes, helps a borrower to get the highest score possible.

BL: When shopping for a mortgage, is it better to talk to directly to a bank or to an independent mortgage professional?

• LH: When speaking directly to a loan officer at a bank, that loan officer is incentivized to have the customer close with that institution. That is not always in the borrower’s best interest. I like to say that my team and I are agnostic as to where our clients get their financing, as long as the terms are best for the deal at hand. This is only one reason why I feel working with an independent financing specialist is more advantageous than trying to obtain financing on your own. An independent broker can also help structure a loan and, because he can access the entire market, will be able to come up with tailored solutions specific for each client.

BL: A person is in the market to buy a home and has the required downpayment, and also has the cash flow to handle the anticipated mortgage payments. Although he owns a successful business, the income that flows through to his personal return may not be viewed by a bank as sufficient to cover the anticipated loan. Does this person have any options?

• LH: Getting financing for self-employed borrowers can be one of the trickiest transactions in the mortgage world. Many lenders can’t see past taxable income, which is a lot different than the overall income a business owner has access to. From private banks to debt funds and specialty lenders, there are many options for borrowers that don’t fit the restrictive box most conventional lenders have. Examples of this include loan programs that don’t require tax returns but rather use a company’s gross income to qualify for a loan. In addition, lenders should be directed to look at a borrower’s distribution income as opposed to taxable income. There are also loan programs which use only rental income when determining what amount a borrower can get approved for on an investment property. These common sense underwrites have grown in popularity over the last few years.

BL: Where do you see rates going in the next year? What would you advise to someone who is in the market for a home, but is thinking that maybe they should wait until rates drop further?

• LH: It’s not a secret that interest rates have jumped considerably over the past couple of years. I don’t believe that we will see the super low rates that we enjoyed in 2020 and 2021. I do believe rates will settle from where they are today. That drop will likely take longer than many in the market are expecting. Because of this, I don’t believe an interest rate should determine what or when you buy. If the property in questions works for you and you can afford the monthly payment, I would buy. It is impossible to time the market and the opportunity to refinance always exists.