With interest rates increasing, new strategies need to be considered when attempting to purchase a property. As the residential real estate markets are settling to the point where they are leaning favorably to buyers, here are some observations that we are seeing which help buyers negotiate more favorably:
1. Get Pre-Approved & Be Ready to Strike – When a pre-approved buyer makes an offer to purchase, the most important detail is the financing. If a seller and their listing agent are aware that a buyer is pre-approved, they are more likely to take the offer seriously.
2. Temporary Rate Buydown – Currently the interest rate environment is volatile and tough for buyers. Sellers are aware of this and as a result they are oftentimes incentivized to make concessions, such as offering to cover a rate buydown, in order to make the financing easier for the buyer. This is where a temporary interest rate buydown becomes more attractive the first 1-2 years of the term of the loan by offering an interest rate that is approximately 1%-2% below the current market rate.
3. Make it easy for the sellers – In addition to writing a clean offer and having the financing ready, it is also important to make sure that any other concerns the sellers have are also addressed at this time.
4. Do not be afraid to buy now – There will always be opportunities to refinance later. There is constant innovation in the mortgage markets, which results in new mortgage loan programs – this can include ARM’s, offset mortgages, increased loan limits (such as the new conforming loan limits of $715,000 that just went into effect recently).
5. Get into a mortgage payment which you can afford – It’s OK to be conservative with your finances and purchase a home that is not perfect (this is especially true if you are a first-time home buyer).
6. Do not rush into buying a property – Negotiate hard. The only parties that are more rattled by the increase in interest rates than buyers are sellers. Sellers are now starting to realize that the real estate market is getting messy. As a result, sellers are panicking and more motivated to sell now.
7. Big Banks (large financial institutions) have no appetite for volatility when it comes to mortgage loans. As a homebuyer, it is imperative to work with a reputable mortgage lender as big box banks are known for not honoring rate locks and loan approvals for homebuyers when there is turbulence in the markets.
8. HELOC & 2nd Mortgages – A second mortgage may be a great option to access equity from your home without having to refinance a first mortgage loan and losing a good rate that you may already be locked into.
9. Non-traditional Mortgages (Non-QM) – A non-QM loan is an alternative mortgage loan product that is forgiving for borrowers who may not have satisfactory income, credit, or assets to qualify for a traditional mortgage loan.
10. Reverse mortgages – For senior citizens who are retired or cornering retirement, a reverse mortgage becomes more critical to consider during bear stock markets. This loan eliminates the mortgage payment by deferring the interest to the loan balance at a variable or fixed rate of interest. Reverse mortgages also are available to qualified seniors who are looking to purchase a home and not carry a mortgage payment.
If approached correctly, this is a powerful combination to help get your offer accepted on favorable terms. If you have any questions regarding our Temporary Buydown program, please contact us at (760) 930-0569 and one of our loan officers will be happy to assist you.