Real Estate January 16, 2023

What is an Interest Rate Lock?

It is no surprise that you might have questions when buying a home. There is a lot to know. Having a good realtor on your side can help you navigate some of those tough questions. Don’t have a realtor of your own? Contact us here and we will get you connected.

In this article, we will be discussing mortgage loan rate locks and how they are used to help you when you are buying a home.

In a market with frequently changing interest rates, some people worry that their interest rate will change before they get into their homes. Depending on the individual circumstances this could be a realistic fear. It is important to discuss this with your trusted realtor and your lender. However, lenders know you need time to search for your home after you have been pre-approved. A rate lock is implemented to protect your agreed-upon rate for a specific length of time.

Let’s discuss this further.

A rate lock is an agreement between you and your lender guaranteeing a specific interest rate will be provided to you for a specific length of time after the pre-approval. This is called the rate lock period.  Your lender will confirm with you your interest rate, the start date, and the date of expiration.

What if interest rates go up before I close on a house?

Rest assured you are locked in at your agreed-upon rate even if interest rates have gone up before you close. But again it depends on the expiration date. You might be wondering how lenders can do this.  As soon as your rate is locked, lenders purchase money from their investors for you at your rate to be ready for you to spend it when you find your home.  Assuming your loan application is approved (see our “Nervous about getting approved for a home loan?” article) and all the terms and conditions for the approval have been met the money is made available to you at closing regardless of the changes in the market after you had locked in your rate. Lenders do not ask you to pay a higher interest rate just because market rates have shifted upward.

Why you shouldn’t wait to lock your rate even when interest rates are dropping.

Would it be more disappointing to have locked in a rate and find that you have missed a lower rate, or NOT locking in your rate and then having rates increase? Trying to time the market can be a dangerous game. Often the market spikes without warning leaving buyers regretting not locking in lower rates. Don’t forget if rates continue to fall, you can often refinance your loan typically after 120 days. Check your lender’s post-closing refinancing policy and make sure to discuss this with your lender ahead of time.

If you do not have a lender of your own or would like to discuss buying or selling a home, please do not hesitate to connect with us so that we can help you.

 

Email us at WhidbeyCommunications@windermere.com or call us at 360.675.5953

 

Real Estate January 2, 2023

Nervous About Getting Approved For a Home Loan?

Are you nervous about getting approved for a home loan?

Don’t be! Staying informed about what to expect and what you should and should not do will help ease some of that worry. We are here to help you.  Follow these simple DOs and DON’Ts and they will help you avoid hiccups during the approval of your home loan.

Dos:

  1. Continue to your current rent or mortgage payments on time.
  2. Stay up to date on all existing accounts (even if you are paying them off).
  3. Continue to work for your same employer.
  4. Continue to use the same insurance company.
  5. Continue living at your current residence.
  6. Continue to use your credit cards as normal.
  7. Call your trusted lender if you have any questions.

 

Don’ts:

  1. Make any major purchases like cars, boats, furniture, jewelry ect.
  2. Apply for a new line of credit (credit card or loan) even if you are pre-approved.
  3. Open a new credit card.
  4. Transfer any balances from one account to another.
  5. Pay off any collections or accounts without first checking with your trusted lender.
  6. Close any credit card accounts.
  7. Change bank accounts or banks.
  8. Max out or overcharge your current credit cards.
  9. Consolidate your debts into fewer accounts.
  10. Take out a new loan.
  11. Start any home improvement projects.
  12. Finance any elective medical procedures.
  13. Open new cell phone accounts.
  14. Create a new fitness membership at a gym or club.

 

If you run into any unique situation that leaves you questioning whether you should proceed it is in your best interest to connect with your lender and ask before you make any decisions. Your lender can help you determine what is right for you in your unique situation to achieve your financial goals.

If you do not have a lender of your own or would like to discuss buying or selling a home, please do not hesitate to connect with us so that we can help you.

Email us at WhidbeyCommunications@windermere.com or call us at 360.675.5953

Real Estate November 28, 2022

VA Home loans help Veterans Reach The American Dream

VA Home loans help veterans reach the American dream.

If you or a loved one has served in the military this article is meant for you.

It is important for you to not only know that there are Veterans Affairs (VA) home loans available to you, but also understand the program, its purpose, and the benefits available to you at its fullest.

Follow along as we break it down into bite-size pieces so that you can be best prepared for the purchase of your own home.

UNDERSTAND THE PROGRAM

Veteran Affairs home loans provide millions of veterans the ability to purchase their own homes. They have been providing these types of loans over the past 78 years.

To be eligible for a VA home loan one must be an active service member, a veteran, or an eligible surviving spouse.

UNDERSTAND ITS PURPOSE

The U.S. Department of Veterans Affairs   wants to say thank you for serving by making homeownership a real possibility for those who have dedicated their lives to serving our country. They have made it their mission to serve you by providing home loan guarantee benefits in addition to other housing-related programs that assist you in buying, building, repairing, retaining, or adapting a home for your own personal use.

 

UNDERSTAND THE BENEFITS

Some of the major benefits of using a VA home loan is that most eligible borrowers can purchase the home with NO DOWN PAYMENT! That means you don’t have to save up to buy your own home and you are not penalized for not having a down payment. Typically, most other loans that have down payments below 20% require what is called Private Mortgage Insurance often referred to as PMI. This is an additional monthly fee tacked onto the mortgage that can be removed once you’ve reached 20% of the mortgage. How does this benefit you? You have an overall reduced monthly cost. In addition, VA loans offer competitive terms and mortgage interest rates.

The Executive Director of the Department of Veterans Affairs Loan Guaranty Service, John Bell, recently described the strength of the program by saying:

“It provides early ownership for many people that would not have that opportunity to begin with. Since there’s no down payment, it allows people to hold their wealth and it gives them the ability to have long-term financial security by being able to own a house and let that equity grow.”

Our veterans sacrifice so much during their service to our nation. One way we thank them is to ensure they have the best information about the benefits of VA home loans. Thank you for your service.  If you are considering using your VA home loan and wish to speak with an agent, please connect with us here  or email us at  Whidbeycommunications@windermere.com.

Real EstateStats May 9, 2022

Rising Mortgage Rates

Whether you are thinking about buying or planning to sell, it is critical for you to understand the role mortgage rates play on buyers purchasing power, and sellers listing prices.

But first, some definitions…

Mortgage rates:

the rate of interest charged on a mortgage loan.

Buyers purchasing power:

the amount of home you can afford to buy and is within your financial reach.

Seller’s listing price:

The sales price of a property when put on the market.

How the fluctuation in mortgage rates affect the two:

Buyers:

Mortgage rates directly affect the monthly payment buyers make on their home purchase. Even the smallest increases in mortgage rates can significantly impact their purchasing power. Typically speaking, for every 1% increase in mortgage rates buyers lose 10% of their purchasing power. In other words, when rates increase, so do monthly payments forcing many buyers to purchase less expensive homes to make up for the difference in interest and vice versa. With rates currently increasing, buyers need to beware that further mortgage rate increases could potentially limit their future purchasing power. If you are in the process of buying a home, it is of the utmost importance to have a strong plan. Connect with us so we can help you.  

Sellers:  

Rising mortgage rates result in a reduced number of overall buyers. With that said, we will likely begin to see the outrageous sales prices begin to decrease. Over the past couple years, we have witnessed a strong sellers’ market coupled with mortgage rates at an all-time low. This gave buyers the ability to purchase more home for low monthly payments. The limited inventory (homes for sale) resulted in wild selling prices. As buyers begin to get priced out of the market and mortgage rates begin to increase it will be of the utmost importance to carefully price your home for the market. You don’t want to risk coming out too high and getting stale or missing the opportunity to maximize interest. Skilled brokers will take into consideration and evaluate numerous factors when pricing expertly. It is not just the condition and location of the home, recent nearby sales, price of similar homes currently on the market but also mortgage rates, buying power, and other local variables. If you are thinking of selling connect with us so we can position your property to stand out in the current market.

Freddie Mac is saying. “History suggests that when rates rise, there is an initial bump in home prices, as many move quickly to buy a home before rates increase further. But after that period, home prices slow. Freddie Mac analysis shows that a 1% increase in mortgage rates results in home price appreciation that is four percentage points lower. For instance, a 1% increase in mortgage rates would change home price growth from 11% to 7%.”

Where we are at today:

Currently, the average 30-year fixed mortgage rate is above 5%. Experts anticipate that mortgage rates will continue to increase in the months ahead. If you are a buyer you have an opportunity to get in ahead of that increase by purchasing now.

Expert tip:

It is critical for you to get preapproved as early as possible to get todays rates locked in and prepare yourself with a plan incase rates are to go up. Additionally, sellers have a unique opportunity to still capitalize on the current situation if they are to list now before more buyers are completely priced out of the market and home prices are still strong.  The graph below illustrates how mortgage interest rates drastically impact purchasing power and ultimately reducing the number of buyers bidding on homes in the higher price ranges.

Buyers Purchasing Power, Rising Mortgage Rates, Whidbey Island, What it means for you, Buyers, Sellers

Whether you are considering buying or selling let’s connect so that you have a trusted real estate advisor on your side who can help you strategize to achieve your dream of home ownership.

ClintonCoupevilleFreelandGreenbankHomeLangleyOak HarborReal Estate October 4, 2021

How Long Does it Take to Save For a Down Payment?

Saving enough money for a down payment on your first home can be one of the biggest obstacles to homeownership. Depending on your circumstance you might need anywhere from 3% – 20%. Speaking with a reputable local lender will help you find out exactly what your percentage will be.

But how long should it take, you ask!?

Follow along as we estimate the amount of time it takes a person earning a median income and paying a median rent to save up for a down payment on a median-priced home.

To accomplish this task we use the concept that homeowners should pay no more than 28% of their total monthly income on housing expenses. We use this information in combination with data from the U.S. Department of Housing,  Urban Development (HUD), and Apartment List to determine our estimation.

According to the data pulled, the national average for the time it would take to save for a 10% down payment is roughly two and a half years (2.53). Looking at the diagram below you can also see that those living in Iowa can save for a down payment in as little as 1.31 years while those in California could take 17.56 years. The map below can help you determine the amount of time (in years) it can take for you to save in your state:

United states, Down Payment, Map, Lenders

 

What if you only need to have a 3% down payment?

It is a common misconception that you need to have a 20% down payment to buy a home.

The reality is there are reasonable alternative options out there. First-time home buyers have an advantage with a plethora of down payment assistance programs available to them. You just have to find the right lender and ask. Need help finding a lender? Ask us to connect you with one here.

What if you qualify to take advantage of one of the 3% down payment programs?

If you qualify for a 3% down payment program, then you only have to come up with 3% of the total cost of the home at closing instead of ten or the typical 20% we have seen required in the past. Saving for a 3% down payment might not take you very long. In fact, it could take less than a year in most states, as shown in this map here:

saving for a down payment, Buyer, Buy a home, Windermere

At the end of the day

Wherever you are in the process of saving for a down payment, you may be closer to your dream home than you think. Connect with us to explore the options available to you in our area and how they support your plans for buying a home.