Interest Rates

One of the first steps in the home buying process is gaining pre-approval for a mortgage loan. This gives you a realistic idea of the home prices that you can afford and allows you to make a strong offer when you do find the right house. While there are a lot of factors that impact your loan approval and the interest rates that lenders will offer, there are a few steps you can take to make sure that you’re getting the best home loan and mortgage rate.

A look at mortgage rates

As of mid-September of 2022, the average national mortgage rate for a 30-year fixed rate loan broke 6 percent for the first time since 2008.  We’re seeing the continued effects of inflation on the housing market, with mortgage rates and prices rising throughout the nation.  These higher rates and prices have begun to slow the housing frenzy.  In July, the median home sale price in New York City was $775K, a -1% change year-over-year.  There were a total of 3342 transactions, down 21% compared to the same month last year.  However, according to NAR, determined homebuyers are still purchasing homes, mostly because buyers can lock in a fixed monthly payment that is no longer susceptible to inflation like rent prices are.

Because of the stability that homeownership offers; units that are priced right, at least according to today’s standards of home prices, are attracting more potential buyers and receive more than one offer.  To help buyers stand out in the market, it’s more important than ever to get preapproved for a home loan.  Lenders look at a variety of factors when determining if you qualify for a loan, including your credit score and the amount of your potential down payment.  These factors can positively or negatively impact the mortgage rate and amount that you’re approved for, so before settling on one rate and lender, here are some important steps to take to find the right loan for you.

Don’t just look at the rates online

Most mortgage lenders list their current average rate on their websites.  But the key word here is average.  This number does not reflect each borrower’s current financial situation, so you can’t know if that is the exact rate that you would get approved for if you applied to that lender.  To know what rate you would get, you need to go through the preapproval application process.  Lenders will look at your debts, assets, and income to determine what you can afford and offer a loan amount and interest rate that reflects your financial situation.  To know which lenders to apply to, talk with your real estate agent, look at the loan types that lenders offer, and consider expanding your search to different banks, credit unions, and online lenders.

Apply to multiple lenders

Once you’re ready to start the preapproval application process, you’ll want to apply for loans through multiple lenders.  It’s recommended that you apply to three to five different lenders to save the most money.  According to Freddie Mac, for a home priced at $250,000, getting one additional rate quote can save an average of $1,500 over the life of the loan, with the number rising to $3,000 for comparing five lender options.  These savings are dependent upon the price of the home, so for a house worth double that of the example, the savings would be doubled.

As a note, lenders do a hard credit pull when you apply for a loan, which can lower your credit score.  However, when you apply for multiple lenders within a fifteen-to-thirty-day period, they’ll count as one single inquiry, so your score shouldn’t be dinged multiple times.

Compare loan estimates

After applying for a loan with multiple lenders, you’ll receive loan estimates from those lenders.  This document will list the loan amount, interest rate, closing costs, lenders fees, and other important factors that will help you see exactly what they’re offering you as the borrower.  You can compare rates and payments across the lenders to ultimately determine which one works the best for you.  This is a good opportunity to ask the lenders to clarify anything that you’re uncertain of since it is a big decision that you don’t want to make lightly.

While it might take a little time to find the best mortgage loan and rate for you, weighing your options can help you save thousands of dollars on your loan.

Filed under: Blog, Brooklyn, Buying, Condominium, Cooperative, Finance, Financial Tips, Home Buyer, Homeownership, Interest Rates, Investing, Mortgage, Real Estate, Real Estate Questions, Real Estate Tips by Ryan Roberts
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We’ve all felt the effects of inflation, whether through higher gas prices or spending more on food at the grocery store, but it’s left many of us wondering what it means for the housing market.  While inflation can be somewhat unpredictable, we can look at a few key ways it’s been known to impact the housing market and also can better understand what it means for homeowner and homebuyers.

What is inflation?  

Inflation is the increase in the prices of goods and services over time.  The level of inflation is determined by the broader impact of higher prices and is measured through a few different indexes, with the most common being the Consumer Price Index (CPI).  CPI looks at the average cost of living, including goods and services such as transportation, food and medical care.  It helps to identify periods of inflation and how it influences the affordability of the cost of living.

Ultimately, a rise in inflation means a decrease in purchasing power, as the dollar doesn’t go as far as it did before.  Deflation, on the other hand, comes with an increase in purchasing power as prices of goods and services drop.  Therefore, home prices and the cost of rent fluctuate with the level of inflation, influencing the housing market.

Supply and Demand 

The law of supply and demand examines the relationship between buyers and sellers, specifically the price of a good and the willingness of a buyer to pay that price.  Inflation has a direct impact on supply and demand.  Historically, the demand for houses may be lower during higher periods of inflation because of higher mortgage rates, something that can cause houses to sit unsold for longer periods of time and their prices to sometimes drop.  While that might not seem like great news for homeowners, it’s worth noting that the overall value of houses steadily increases over time, meaning that houses will still likely sell for more that what homeowners initially paid for them.  And if time isn’t of the essence and homeowners can wait longer to sell, then the market would eventually balance out.

On the other hand, this can be good news for homebuyers since there’s less competition for homes as more people may wait for mortgage rates to drop again.  Since inflation can be somewhat unpredictable, it’s not always easy to determine when exactly rates will rise or fall.  Ultimately, homeownership is still a highly valuable investment for a variety of reasons.

Why homeownership is valuable 

As mentioned earlier, inflations causes the cost of all goods to rise, thereby impacting the general affordability of the cost of living.  Gas prices rise, groceries cost more, the cost of materials are higher, and housing costs increase.  It’s not necessarily a one-to-one relationship, but inflation has broad reach.  Higher mortgage rates might deter people from their pursuit of homeownership, leading more people to look into rental options.  However, rent is always fluctuating.  The price you pay for a rental will continually be susceptible to the current economic market, so you’ll rarely have a long-term fixed monthly payment.  Brooklyn median rents with concessions hit a new high at $3,206, a 7% increase from the month prior and a 21% increase from this time last year.  On the other hand, when you buy a home with a fixed mortgage rate, you’ll have one steady payment that will not change even as inflation increases or decreases.  The house would also appreciate over time, meaning the value of the property will increase.  Any initial down payment ends up being worth more since that number was determined by the cost of the house and the mortgage rate when purchased.  Homeownership is an investment, but it’s well worth it.  And in the long term, mortgage rates as of August 2022 are still lower that the historical average of 8 percent.

Inflation isn’t forever

The good news for both buyers and sellers is that inflation doesn’t last forever.  It eventually must end, otherwise money would continue to be devalued which would have a greater negative impact both nationally and on individuals.  So for the benefit of everyone, you can trust that inflation will decrease over time.

Filed under: Blog, Brooklyn, Buying, Condominium, Douglas Elliman Real Estate, Finance, Home Buyer, Home Value, Homeownership, Inflation, Interest Rates, Investing, Mortgage, Real Estate, Real Estate Questions, Real Estate Tips, Renting, Selling, Supply and Demand, Uncategorized by Ryan Roberts
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Over the past year, the real estate market has been marked by unpredictability and, at times,  overheated competition.  This has resulted in some buyers bowing out after one too many disappointments while other potential buyers put off their home buying plans, hoping that things would settle down.

Whichever type of buyer you are, you may be thinking ahead to the new year and planning to begin a search for a new home.  If so, it’s vital to prepare for the challenges and opportunities that lie ahead.

Financial Preparations

Preparing yourself financially will be one of the most important aspects of your homebuying plan. While many potential buyers have a good grasp of the savings required for a down payment, they may not be prepared for the other expenses associated with home buying, including:

• Earnest money deposit (EMD)
• Closing costs
• Application, origination, and underwriting fees
• Home inspection
• Appraisal
• Moving expenses

Of course, one of the factors that has made the housing market so active over the past year and a half has been the record-low interest rates for home loans.  As you prepare to purchase a home in the near future, you’ll want to keep track of those rates.  While they are not projected to rise significantly, they are projected to rise, so it’s important to gauge the impact that upcoming changes will have on your bottom line.

Remember, the terms of your mortgage can be highly variable depending on your overall financial history and your creditworthiness.  A lower credit score can have a significant impact on your interest rate and chances of approval. Be sure to check your credit report well ahead of time to ensure that there are no surprises and to make any needed adjustments.

In addition, be mindful that a lower down payment mortgage option may result in the need for additional mortgage insurance, raising your monthly payments.  Take this into consideration as you plan your homebuying budget.

Market Research

Planning ahead for your home purchase gives you a great chance to do some research on your chosen neighborhoods.  While this includes proximity to work and neighborhood amenities, it also includes tracking the prices of comparable properties in your target area.

Talk with a real estate agent or broker to develop a baseline for current comps and historic trends in the neighborhood you’re interested in.  Remember that there has been significant market movement over the past year and a half, with home prices rising at a record pace in many communities.  Understanding the change in home values over the past several years can give you a more realistic perspective.

In addition, work with a real estate professional now to develop a targeted search based on your neighborhood and property preferences.  This will allow you to see when new properties come on the market that fit your criteria so that you can begin to develop a sense of how values are changing over the next few months.

Real estate inventory has been low in many places, driving home prices higher and resulting in multiple offers for most new listings. You may have experienced some of these competitive situations and backed off from your home search temporarily.  If you continue to see low inventory levels in the months ahead, talk to a real estate agent about alternatives, including:

• Alternative neighborhoods
• Adjustments to your wish list
• Availability of fixer-upper properties
• New construction in your market
• Changes to your financing to make your offer more competitive

Wish List Creation

Once you have honed in on your chosen neighborhood and put together your numbers, it’s time to take a look at your wish list for your next home. You may find that your preferences are out of step with homes in your chosen neighborhood or that you are underestimating the cost of some of the bells and whistles you have in mind. It’s important to consult with an agent or broker to make sure that your wish list makes sense for the neighborhood and budget you’ve targeted.

Remember, while you may be hoping for a turnkey situation with no repairs or improvements needed, that may not be realistic in the current market. Consider what changes you might be willing to make either before your move-in date or after. Think about your budget and see if you can stretch it to make some desired updates and upgrades on your own dime.

In the long run, it may be better for you to add some flexibility to your wish list. You don’t want to overlook a great property just because it doesn’t check off every single box.  You also don’t want to overpay for a property in lieu of making some minor changes on your own.

Mindset Shifts

Filed under: Appraisal, Blog, Brooklyn, Buying, Douglas Elliman Real Estate, Finance, Home Inspections, Interest Rates, Investing, Market Research, Mortgage, Real Estate, Uncategorized by Ryan Roberts
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If you’re thinking of investing in a house now or wondering whether you should wait and continue renting, here are three important things to consider:

• Renting vs. Buying:  If you rent a home, it could cost you less each month…and you might have more money to invest in other endeavors.  But if you invest in a home you can benefit from a huge tax advantage where you can deduct mortgage interest and property tax payments as well as other expenses from your federal taxable income.
• Housing Prices and Interest Rates:  You may be waiting for the housing prices in your area to fall.  They may not.  However; usually when they do, the interest rates will be higher.  The amount you gain could be significantly less over the long term cost of the mortgage.  Therefore, waiting may not be in your best financial interest.
• The Break-Even Point:  The average break-even point for buying and selling a house is five to seven years.  If you plan on renting for longer than this time frame then buying could be a good economical consideration.

Filed under: Blog, Buying, Interest Rates, Investing, Renting by Ryan Roberts
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