Robert Darrow, Broker Associate
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If you’re planning to buy a home this year, one of the first steps on your journey is getting pre-approved. Especially in today’s market when mortgage rates are higher than they were just a few months ago, getting a mortgage pre-approval can be a game changer. Here’s why.
To better understand why pre-approval is key, it’s important to know what pre-approval is. The Mortgage Reports explains it like this:
“When you’re ready to take the leap into homeownership, your first step is mortgage preapproval. . . . A mortgage preapproval is when a lender determines you’re qualified for a home loan. Your preapproval letter shows the maximum loan amount you’re approved for (your home buying budget), as well as the specific interest rate and loan term you can expect.”
As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand your true price range and how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with mortgage rates rising and impacting affordability, a solid understanding of your numbers is even more important.
Another added benefit is that pre-approval lets the seller know you’re qualified to buy their house. A recent article from realtor.com notes:
“. . . getting pre-approved can actually improve your chances of falling into the sellers’ good graces, and you’ll want to get it done as early as you possibly can in the home-buying process.”
Even though bidding wars are easing this year as the market shifts, preapproval is still an important part of making a strong offer. It can help a seller feel more confident because it shows you’re serious about their home and that you’re a qualified buyer.
Getting pre-approved for a mortgage is critical. It helps you better understand what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to succeed as a homebuyer in today’s market.
While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still high, remaining around 8%. This news impacted the stock market and added fuel to the fire for conversations about a recession.
You’re likely feeling the impact in your day-to-day life as you watch the cost of goods and services climb. The pinch it’s creating on your wallet and the looming economic uncertainty may leave you wondering: “should I still buy a home right now?” If that question is top of mind for you, here’s what you need to know.
In an inflationary economy, prices rise across the board. Historically, homeownership is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. James Royal, Senior Wealth Management Reporter at Bankrate, explains:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
And with rents being as high as they are, the ability to stabilize your monthly payments and protect yourself from future rent hikes may be even more important. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains what happened to rents in the latest inflation report:
“Inflation refuses to budge. In September, consumer prices rose by 8.2%. Rents rose by 7.2%, the highest pace in 40 years.”
When you rent, your monthly payment is determined by your lease, which typically renews on an annual basis. With inflation high, your landlord may be more likely to increase your payments to offset the impact of inflation. That may be part of the reason why a survey from realtor.com shows 72% of landlords said they plan to raise the rent on one or more of their properties in the next year.
Becoming a homeowner, if you’re ready and able to do so, can provide lasting stability and a reliable shelter in times of economic uncertainty.
The best hedge against inflation is a fixed housing cost. If you’re ready to learn more and start your journey to homeownership, let’s connect.
Over the past two years, the substantial imbalance of low housing supply and high buyer demand pushed home sales and buyer competition to new heights. But this year, things are shifting as supply and demand reach an inflection point.
The graph below helps tell the story of just how different things are today.
This year, buyer demand has eased as higher mortgage rates and mounting economic uncertainty moderated the market. This slowdown in demand is clear when you look at the red bar on the graph. It uses the latest data from ShowingTime to illustrate how showings (an indicator of buyer demand) have softened by just over 12% compared to the same time last year.
Now for a look at how housing supply has changed, turn to the green bar. It uses data from realtor.com to show active listings are up nearly 27% compared to last year. That’s because the moderation of demand allowed housing inventory to increase in 2022.
If you’re thinking of buying a home, you’ll have less competition and more options than you would have had last year. Enjoy having more homes to choose from in your home search and lean on a trusted real estate professional to understand how the increase in supply has also increased your negotiation power. That professional can talk you through the opportunities and challenges buyers face in today’s shifting market. You may be surprised to find they’re different than they were a year ago.
If you’re looking to sell your house, know that inventory is still low overall. That means, if you work with an agent to price your house based on current market value, it will still sell despite the inventory gains and moderating buyer demand this year. That’s because there are still buyers out there who want to move, and your house may be exactly what they’re looking for.
If you’re thinking of buying or selling a home, the best place to turn to for information on today’s supply and demand is a trusted real estate professional. Let’s connect so you know what’s happening in our local market and what that means for you.
With higher mortgage rates, you might be wondering if now’s the best time to buy a home. While the financial aspects are important to consider, there are also powerful non-financial reasons it may make sense to make a move. Here are just a few of the benefits that come with homeownership.
Owning your home gives you a significant sense of accomplishment because it’s a space you can customize to your heart’s desire. That can bring you added happiness.
In fact, a report from the National Association of Realtors (NAR) shows making updates or remodeling your home can help you feel more at ease and comfortable in your living space. NAR measures this with a Joy Score that indicates how much happiness specific home upgrades bring. According to NAR:
“There were numerous interior projects that received a perfect Joy Score of 10: paint entire interior of home, paint one room of home, add a new home office, hardwood flooring refinish, new wood flooring, closet renovation, insulation upgrade, and attic conversion to living area.”
And as a homeowner, unless there are specific homeowner’s association requirements, you typically won’t have to worry about the changes you can and can’t make.
If you rent, you may not have the same freedom. And if you do make changes as a renter, there’s a good chance you’ll need to revert them back at the end of your lease based on your rental agreement. That can add additional costs when you move out.
There’s no denying taking care of your home is a large responsibility, but it’s one you’ll take pride in as a homeowner. Freddie Mac explains:
“As the homeowner, you have the freedom to adopt a pet, paint the walls any color you choose, renovate your kitchen, and more. . . . Of course, along with the freedoms of homeownership come responsibilities, such as making your monthly mortgage payments on time and maintaining your home. But as the property owner, you’ll be caring for your own investment.”
You’re not taking care of a living space that belongs to someone else. The space is yours. As an added benefit, you may get a return on investment for any upgrades or repairs you make.
That sense of ownership and your feelings of responsibility can even extend beyond the walls of your home. Your home also gives you a stake in your community. Because the average homeowner stays in their home for longer than just a few years, that can lead to having a stronger connection to your local area. NAR notes how that can benefit you:
“Living in one place for a longer amount of time creates an obvious sense of community pride, which may lead to more investment in said community.”
If you’re looking to put down roots, homeownership can help fuel a sense of connection to the area and those around you.
If you’re planning to buy a home this year, there are incredible benefits waiting for you at the end of your journey, including the ability to customize your home, the sense of achievement homeownership brings, and a greater connection to your community. Let’s connect to discuss everything homeownership has to offer.
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If you’re looking to buy a home, you probably want to secure the lowest interest rate possible for your home loan. Over the last couple of years, that was easier to do as the housing market saw record-low mortgage rates, but this year rates have risen dramatically.
If you’re looking for ways to combat today’s higher rates and lock in the lowest one you can, here are a few factors to focus on. Since approval opportunities can vary, connect with a trusted lender for customized advice.
Credit scores can play a big role in your mortgage rate. Freddie Mac explains:
“When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.”
That’s why it’s important to maintain a good credit score. If you want to focus on improving your score, your trusted advisor can give you expert advice to help.
There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says:
“There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.”
When working with your real estate advisor, make sure you find out what’s available in your area and which types of loans you may qualify for.
Another factor to consider is the term of your loan. Just like with location and loan types, you have options. Freddie Mac says:
“When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.”
Depending on your situation, the length of your loan can also change your mortgage rate.
If you’re a current homeowner looking to sell and make a move, you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains:
“In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.”
To learn more, connect with a lender to find out the difference a higher down payment can make for your new mortgage.
These are just few factors that can help determine your mortgage rate if you’re buying a home. The best thing you can do is have a team of professionals on your side. Connect with a local real estate professional and a trusted lender so you have the expert advice you need in each step of the process.
As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start.
If that sounds like you, your down payment could be more in reach than you originally thought. Here’s why.
If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains:
“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”
Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
This is good news for you because it means you could be closer to your homebuying dream than you realize. For more information, turn to a trusted lender.
A professional will be able to show you other options that could help you get closer to your down payment goal. According to latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments.
A recent article explains why programs like these are helpful:
“These resources can immediately build your home buying power and help you take action sooner than you thought possible.”
And if you’re wondering if you have to be a first-time buyer to qualify for these programs, that’s not always the case. According to an article from downpaymentresource.com:
“It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.”
There are also location and profession-based programs you could qualify for as well.
Saving for your down payment is an important first step on your homebuying journey. Let’s connect today and make sure you have a trusted lender to help explore your options.
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Rising interest rates have begun to slow an overheated housing market as monthly mortgage payments have risen dramatically since the beginning of the year. This is leaving some people who want to purchase a home priced out of the market and others wondering if now is the time to buy one. But this rise in borrowing cost shows no signs of letting up soon.
Economic uncertainty and the volatility of the financial markets are causing mortgage rates to rise. George Ratiu, Senior Economist and Manager of Economic Research at realtor.com, says this:
“While even two months ago rates above 7% may have seemed unthinkable, at the current pace, we can expect rates to surpass that level in the next three months.”
So, is now the right time to buy a home? Anyone thinking about buying a home today should ask themselves two questions:
There are two places to turn to answer this question. First is the consensus of what experts are saying. If you look at what experts are projecting for home prices in 2023, they’re forecasting home price appreciation around 2%. While it’s true some are calling for depreciation, most are calling for appreciation in home values over the next year.
The second spot to turn to for information is the Home Price Expectation Survey from Pulsenomics – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists. According to the latest release, the experts surveyed are also calling for home price appreciation for the next several years (see graph below):
Like mentioned above, Ratiu sees mortgage rates rising over the next several months. Another expert agrees. Mark Fleming, Chief Economist at First American, says:
“While mortgage rates are expected to continue to drift higher over the coming months, much of the rapid increase in rates is likely behind us.”
The instability in the world and higher inflation are driving this volatile market, resulting in higher borrowing rates for those looking to buy homes.
If you’re thinking about buying a home, asking yourself about home prices and mortgage rates will help you make a powerful and confident decision. Experts see both prices and rates rising in the future. The alternative is to rent, but rents are also increasing. That may mean buying a home makes more sense than renting.