Tag Archives: 1st time home buyers

How do we navigate a real estate market with a higher interest rate?

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We see the price changes. We see the pending sales fall out escrow. Buyer remorse could hit during the transaction or after. It’s no surprise. Buyers have to pay more for a loan, almost 70% more from a few years ago. Supply is still low but buyers are feeling the cost of purchasing rising, so contenders are falling out of the race and sheltering in the rental space.

I kept telling my clients that the older 3% interest rate on the 30 year fixed product was a steal. Loans being made at 3% is basically free money. If you have that rate, you should congratulate yourself.

Cash position buyers are unaffected by interest rate hikes but they could have better bargaining positions when submitting to sellers.

Buyers need to look at the numbers and see what their monthly liabilities with the new interest rate. Once that number is obtained, it can be contrasted against their current living expenses. They needn’t forget that the home purchase is also an investment that appreciates and they may have a return on that as well. In addition to looking at the numbers, ask yourself how long you intend to occupy the property. Mortgage loan originators are essential here to provide this information to you.

Imagine yourself looking at properties that have spent 30 days on market and have went through 1 or 2 price changes. What should you do? Look at the comparable sales and see what the competition is for this house and determine if any other houses are substitutes to this house. If you feel the house will not go pending by anyone else, calculate a trend of the price decline in your specific neighborhood and discount the property based on that trend. A realtor can assist you with this.

So looking at the numbers plays a large role in how you will proceed. While interest rates are up, don’t be discouraged. You will get a price discount that will help you out. If you own already and want to purchase a larger home, ask the MLO what it will take to rent out the existing property and buy the next property. It could be the start of your own real estate portfolio if you consider it carefully.

 

 

Are you a tire kicker or a home buyer?

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Are you a tire kicker or a home buyer?

In the advent of a more transparent real estate market, where listings are found all over the internet, it is sometimes thought of by persons that browsing a few listings on their phone makes them a home buyer, without much consideration to their qualifications. You might call these people “tire kickers”. What I want to do in this article is distinguish between a tire kicker and a home buyer, and give advice on how you can be in the latter camp.

Tire kickers are often those people who might browse around and window shop without any intention to buy. Tire kickers exist in a retail environment where persons are encouraged to look around to decide to buy or not. Tire kicking may not be a bad thing. In fact, those who enter stores and don’t buy anything might return to buy at a future date, or by word of mouth, recommend the store to somebody else.

Let me know talk about online tire kickers. Online tire kickers might have the quality of browsing for goods online and even adding something to their shopping carts and never check out and pay for anything. They might flirt with the idea of owning something and add it to a cart or wish list, but never pay. Back end engineers often spend lots of time wondering how they can convert these tire kickers into real buyers. Ergo, much time is spent programming guest registration and check out instructions to make sure these people can seamlessly enter credit card information for a purchase.

So far, we have seen that tire kickers have some vague interest in owning something but may not follow through with it. At this point, we could venture into the philosophic question of rational choice theory, but we might bracket that conversation for a later time and just focus on the “what” instead of the “why”.

Let us know jump back to owning a home in real estate. Owning a home in real estate is a serious step in one’s life and, often, such a decision is not possible without evaluating one’s life circumstances. If the life circumstances are right and buying a home is part of that master plan, then that is often the first step in converting a person from a tire kicker to a home buyer.

The next step to converting a tire kicker to a home buyer is by loan/ bank qualification. Homebuyers need to speak to a loan agent or present their bank statement to their real estate agent to show they have the means to make a purchase.

There’s no nice way to say it, but if you have not researched the means to purchase a home, you are not a homebuyer! People sometimes forget that homes require money to purchase. This money will either come from your personal bank account, a gift from a family member or friend, or from a banking institution who will lend you the money, less the down payment and closing cost fees.

Once you have identified your home buying qualifications, which alludes to your purchasing power, then you can meet with your Realtor to find out just exactly how much “house” you qualify for. This is when returning to the phone and the desktop might be relevant to look for houses. Your pricing parameter is clearer and your home search is more concrete. Not only will you have more confidence in home buying, but you are more likely to succeed in purchasing a house than those who do not get qualified first.

I hope I have outlined the steps to convert yourself from a tire kicker to a home buyer, which in summary is to identify whether your life circumstances demand and tolerate a purchase for a home, and then produce a loan qualification letter that states an official banking institution has given you the OK to make the purchase. I think one reason I wrote this article is because I speak to hundreds of buyers daily on purchasing a house, and many of them are casually looking without much of a plan, and this is frustrating for them since they expect to buy a house just because they can look it up online, and frustrating for me because it is not a good use of time. What I can say is that tire kickers might also specify a time in the future where they might be thinking of buying, and that might be another talking point for the future. Buying a home depends heavily on the readiness of the buyer/consumer, and I am not one to rush anyone into a complex process, but homebuyers are not homebuyers until they are qualified!