Today more than ever it is important to have a knowledgable lending source that can provide a buyer with all the options available to them. With rising interest rates, understanding every option can provide the best available path to buying in this market. Not every lender & bank is the same and you don't know what you don't know so work with someone that knows!
As a buyer, here are questions to consider around financing:
1. How long do you plan to live in the home?
2. What is my credit score and can I improve that score? (lower rates!)
3. Have you explored financing options besides the commonly known 30-year fixed rate amortizing loan?
4. How secure is your job/income? What is the health of your financial profile, assets, debt, etc?
5. Could a lower/higher down payment alter your net financing cost?
6. If your mortgage interest payments are higher, how does that impact your tax returns with the $750k max interest deduction?
7. What are ALL the financing options at my disposal?
8. What is my confidence in my lending source?
9. Am I being provided more than one option?
Multiple offers in a short amount of time has slowed considerably. Homes are sitting on the market longer & the expectation of receiving multiple offers has dramatically decreased and negotiability of sales prices is rising. Here is an example: If 6 months ago a $500k home buyer anticipated paying 10% over the asking price in multiple bidding - an additional $50k - but now they can buy that same house for 5% below the ask.....or $ 475k...here is the potential savings breakdown:
1. With a $75 k lower price they will also need $95k vs. $110k for the 20% down payment, a savings of around 13.5% in cash.
2. If 80% of the $550k purchase was financed at 4%, that monthly payment would have been about $2,101/month (30-year fixed amortizing loan)
3. If 80% of the $475k purchase is financed at 6%, that monthly payment - with the lower down payment - jumps to $2,278/month., about $178 per month more.
4. The cash savings on the down payment - $15,000 - will pay for 84 months of the increased monthly payment, roughly 7 years.
5. If you were to get a lower rate - say 5% - using a 7-year ARM, that payment drops to about $2,040.....LOWER than the 4% financing on the more expensive sales price!
When it comes to financing, substantive knowledge and an accurate profile can be invaluable in evaluating ALL your options, not just the obvious ones. Right now, digging deep into all financing options and parameters, and curating customized options will give buyers an advantage.
Working with a lender you know & trust is also extremely valuable, building a relationship with a service provider that so heavily impacts your financial situation is important. For more information on local lenders that provide a high level of service, contact us.
