Real estate, like many industries, goes through cycles. As a lengthy seller’s market has shifted to more of a buyer’s market, new tools are available for those looking to purchase. It’s a refreshing change for buyers who had to endure the headache and heartbreak of being outbid on a home — or never even seeing a particular listing before it disappeared from the market.
The momentum of the market has shifted, and it will inevitably shift back again, so time is still of the essence if a buyer is hoping to take advantage of this current season for real estate. Here are five tips and tricks every buyer should keep in mind as they progress through the process of purchasing a home.
Shop for loans.
While you hear news of the Federal Reserve raising interest rates, it is a little known fact that what the Fed does with rates does not directly affect mortgage interest rates. In fact, we’ve seen mortgage rates come down recently in spite of the Fed raising their benchmark rate. A relatively volatile rate environment means buyers should shop around for loans. Buyers have the ability to take advantage of several different types of mortgages and homeownership programs, which means it would be foolish to go with the first one that is presented. Your power as a consumer hinges on your ability to shop for the combination of the best rate, the best loan program, and the best service available from your loan provider.
In a buyer’s market, it’s much easier to negotiate price. Gone are the manic days of bidding wars that reach thousands of dollars above the list price. And since homes are staying on the market a bit longer, buyers are able to approach a potential purchase with confidence by making an offer that most appropriately fits their budget. While there is no guarantee that it will get accepted, it’s worth actively negotiating in the current environment.
An eager seller may consider agreeing to concessions that will allow the buyer to offset some costs. Seller funds can be used to lower buyer closing costs by applying some of the seller proceeds to buyer expenses such as lender fees, prepaid taxes, prepaid mortgage interest and prepaid insurance. Those funds can also be used by buyers to buy down the loan’s interest rate. In the end, those funds will lower the buyer’s monthly payment. So, it’s important for buyers to consider where concessions could be suggested as part of their purchase offer.
Leverage the conforming loan limit.
Market conditions are making purchases easier for buyers not just because of the pace of the market but due to the adjusted conforming loan limit, which has increased to $726,200. What does that increase mean? It means buyers have more room to work with when it comes to a purchase price and required down payment. With increased buying power, buyers are able to borrow up to that limit with a limited down payment. If purchases exceed that limit, buyers still have options. But this increase gives buyers a little more wiggle room.
Look beyond the rate.
Mortgage rates won’t always be as high as they are now, and analysts with the Mortgage Bankers Association expect them to drop to around 5% by the end of 2023. That forecast is valuable information as buyers consider the purchase of a home — a long-term investment — knowing that the possibility to refinance at a lower rate exists in the not-too-distant future. So, it’s important for buyers to see the big picture of a purchase rather than focus solely on the current mortgage rate when making a decision.
If you’re considering a move, the team at Halpern Residential is ready to help. We keep an eye on market trends so you don’t have to. Moving is an exciting time of transition, and we’re ready to help you with it. Contact us today so we can learn more about how we can support your needs.