Now is the Time to Buy
We all lived and watched it on the evening news. Unsustainable loan practices of rapacious mortgage lenders, secure in knowing their “golden parachute” would offer them a soft landing, combined with lax regulation to tank the world economy. The value of homes sunk below mortgage balances, the stock market all but collapsed, unemployment lines grew and personal wealth evaporated. We turned off the television when the great recession led to personal depression.
Custom builders that had dominated the upper end of the market had time on their hands and many went into home repairs, renovations and additions, and some just found another line of work. Developers were left with unsold lots in subdivisions with streets, water, sewer and an unpaid debt to the bank, which was answerable to stock holders and bank regulators. The economy was a house of cards in a financial windstorm. In time, the void left by the local builders was filled by national and regional builders, who feasted on cheap lots like walking dead. The inventory of available lots disappeared, boxy houses went up on small lots, and we became familiar with the builders by the cheap signs that littered intersections like weeds.
It is November of 2016 and the lessons of supply and demand still apply. While the federal reserve is whispering about raising rates, they are still at a historic low. Higher rates mean buying less house. The availability of developed lots has all but disappeared. Home prices are inching up, and the unemployment rate is almost an acceptable number. Demand is rising while supply is shrinking. It is time to buy a house. If you have been waiting for that most opportune moment, you may have missed it. The first steps are about knowing how much you can afford by consulting a mortgage banker and selecting an agent with local knowledge and expertise.
Financing: Any offer you make on a house will need to be accompanied by a pre-approval lender from a mortgage lender or a statement showing the money is in your account. If you are paying cash, good for you, but even if you can, you may want to borrow. With interest rates this low, it is cheap money and you may want to save yours for something else. The lender will tell you how much you can afford, so you and your agent don’t waste time on the unaffordable.
You credit score will look best and your interest rate will be lowest if several months before approaching the lender, you have paid down your debt. You want the score to come in at 720 or higher for the best rate. If you can pay down that debt and still have 20% of the purchase price for the house in your accounts, you have done yourself a big favor. This will allow you to avoid private mortgage insurance, which is usually one to two percent of the loan value, and will be a part of your monthly payment until you have a 20% equity in the house.
Budget: Sometimes our possessions own us, and that is especially true of a house. Think beyond the repayment of principal and interest. Consider the taxes and insurance, homeowner association fees and assessments, utility expenses, repairs and maintenance. The roof and HVAC look good now, but neither will last forever. Then there is the unpredictable. Working on your budget will be a good dry run for making a loan application. The lender will want to see a couple of years of tax returns, recent paychecks, payment of utilities, credit cards, student loans and the like.
The Fun Part: A tiresome expression in the business is that location is the three most important things in real estate, but location is different things to different people. Proximity to work, where will you want your child to go to school, are your favorite groceries and other shopping venues nearby, these are all factors in deciding where to buy and you will save a lot of time by narrowing it down. Look around for the neighborhood where you would like to make your life and memories, then call your agent. Why do you need an agent? That is the subject of another blog, Buyer Representation. For now, the seller in most cases is represented and you should be too.
In selecting an agent, there is no substitute for experience. In more colloquial terms, you want someone who “knows where the bodies are buried.” Is the neighborhood on the rise or in decline? What is there to recommend the schools? What is drive time traffic like? Is a new Verizon call center going to be built in your backyard? Does the agent have the resources to find the information you need? Does he have the skills to negotiate an acceptable contract? I have a law degree and 24 years in the practice of law, with a focus on contracts and real estate, and I have been in this business since 2006 when I became a licensed broker. When it is time to make the call, I would appreciate the opportunity to go to work for you
Walt Smith, Broker
Coldwell Banker Residential Brokerage
803 622 5210