Mortgages, Money and Today’s Buyer
For a long time, finding the house of one’s dreams was the easy part of home buying. A first-rate realtor, intimately familiar with her clients’ wants, needs, and tastes, showed properties until the happy shoppers found ‘the one.’ The nitty-gritty of the financial aspects followed, but homebuyers in the US had enjoyed a long and unusual period of low-interest rates and a robust market, making even that aspect of the purchase relatively painless.
However, these are not normal times. Low inventory, high-interest rates, the pandemic, and inflation have disrupted the market. Nevertheless, there are still shoppers wanting a first home or needing a second, whether that’s because of children arriving, job transfers, or other life changes. Partnering with the right realtor and financial partners can help buyers get that set of house keys in their hands, even now.
Find that house, get that loan.
Andy Nolte is a senior loan officer with Fairway Independent Mortgage Corporation and a frequent collaborator with Ellen Zetmeir – ReeceNichols Real Estate.
“We’re constantly trying to be creative in reducing that monthly mortgage payment to help get first-time homebuyers into the house,” he says. “Now, the hard part is finding the right house. After that, let’s lock in the interest rate and refinance as soon as possible.”
He admits that he doesn’t have a crystal ball, but “history shows that homeownership is still a great investment and always will be.” He also believes that buyers today must adjust their expectations.
“Many first-time homebuyers aren’t getting exactly what they want,” he says. “But having that conversation about this being an investment means finding a house that checks most of their boxes, investigating financing options, and, in four or five years, finding the house that does meet their original criteria. The most important thing is to just get into the house.”
Options include adjustable-rate mortgages or negotiating with sellers for a temporary buydown, in which the effective interest rate that a borrower pays during the early years of the mortgage is reduced because of the deposit of a lump sum of money into a buydown account, a portion of which is released each month to reduce the borrower’s payments.
He also advises partnering with mortgage brokers to uncover unexpected avenues for reducing interest rates and potential payments.
“We can review credit reports to see what can be done to increase the score,” Nolte says. “We have also partnered with a company that helps clients with federal student loan debt lower the monthly payment, and everyone is eligible. I’ve seen clients with an $800 a month student loan payment get it down to $200, and some with the debt forgiven altogether, putting them in a better position to purchase a home.”
House selected, financing obtained, and now to close.
Emily Smart works for Security 1st Title, a company that facilitates transactions between buyers and sellers, and she has found that the biggest adjustment that new homeowners have to make is in terms of how financial transactions in real estate are handled.
In an online economy where almost anything can be had almost instantly with a click, there’s an assumption that all transactions can be digital, but not so, and least of all in real estate.
“When you purchase a home, you have to have certified funds,” she says. “You can’t just show up and Venmo $250,000 as your down payment, and we get a lot of questions. Can I write a personal check? Can I use a credit or debit card? No. You need a cashier’s check or a wire.”
She recommends that first-time buyers take a class in the processes, expectations, and financial and legal requirements around buying real estate.
“Sometimes a lender might provide first-time homebuyers with a class that walks them through the process,” she notes. “The lender should also let the borrower know that when they go to close on the home, they need the funds that day.”
She also points out that with banking increasingly being done online, with no physical location from which to obtain a cashier’s check, the buyer must arrange for a wire and often must request it and receive it in person. She’s also seen an increase in the number of people who are unaware that they must attend the closing in person.
Her other advice includes not buying a car, changing jobs, or incurring other debts during the house-buying process.
“A good realtor keeps in mind that even though everyone is used to living in an instantaneous world, certain businesses and business transactions are not,” she said. “Ellen does a good job of letting her buyers know what’s expected.”
Even in a market that presents challenges to buyers and sellers, both, patience, an open mind, and confidence in the value of real estate as an effective and reliable way to build wealth, buyers can still find a home.
