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Mortgage Rates vs. the Coronavirus: We Might Test New All-Time Lows

Posted on February 24th, 2020

Mortgage rates can be pretty volatile. Just like stocks, they can change daily depending on what’s happening in the economy.

Beyond that, mortgage rates can move based on news that doesn’t involve a report on the economic calendar, such as a jobs report, GDP, housing starts, inflation, etc.

Even if there isn’t a direct financial implication to a news story, mortgage rates can go up or down.

Just consider the recent conflict with Iran, which may have pushed mortgage rates down a little lower, even though it was unclear what the outcome would be.

It turned out to be a short-lived situation, despite any obvious conclusion or resolution, but that’s just one of many recent examples.

How the Coronavirus Could Affect Mortgage Rates

  • Fear of a global economic slowdown has hit financial markets
  • Dow Jones off nearly 1,000 points, Nasdaq down 350 points
  • Investors fleeing market for safety of alternatives like bonds
  • This has pushed the 10-year bond yield down near its all-time low

Now we’re dealing with what could be seen as a global pandemic in the spread of Novel Coronavirus (COVID-19).

It may or may not have originated in Wuhan, China, but it has rapidly made its way across the globe, with Italy just confirming a fifth death from the virus.

The World Health Organization (WHO) hasn’t yet declared the coronavirus outbreak a pandemic, but did say it has “pandemic potential.”

In other words, there’s a lot to fear due to the unknown and the very real loss of life, and that explains the recent pullback in the stock market.

At the time of this writing, the Dow Jones was off nearly 1,000 points and the Nasdaq was down over 350 points. And that’s after a bad Friday as well.

Part of that has to do with the fact that large companies like Apple have already warned of profit hits due to global supply chain issues, which may affect sales.

The trillion-dollar company acts as a bellwether to other large corporations and the economy at large.

In short, when bad news happens, stocks go down. This is the market’s natural tendency to flee the volatility of the stock market for the relative safety of the bond market.

Some investors may also seek out “safe haven assets” such as gold, which tend to perform well in times of fear and despair.

There is typically a negative correlation between stocks and bond prices, and so today we’re seeing a big drop in the 10-year bond yield.

Long story short, when bond yields drop, so too do mortgage rates.

The Coronavirus Has the Ability to Push Mortgage Rates to All-Time Lows

  • 30-year fixed rates are only about .25% above all-time lows
  • Won’t take much for mortgage rates to test new records
  • Impact will depend on whether coronavirus spreads or slows
  • Watch out for a quick reversal if any good news surfaces

We know investors are quick to ditch risk when there’s uncertainty in the air. But the bigger question is will this pullback be meaningful?

Will it actually matter in a few months (or even a few weeks), or will it turn out to be just another headline that goes away once things settle down?

Hopefully it does get resolved soon for the sake of anyone affected.

But because we don’t have those answers yet, there’s a good chance stocks will continue to fall, at least in the short term.

As such, expect increased downward pressure to apply to mortgage rates too, which might be good news for those looking to refinance a mortgage or purchase a home.

Of course, mortgage rates are already pretty rock-bottom, and not necessarily holding anyone back. It’s the sky-high home prices that are causing affordability issues.

And really, lower rates may just exacerbate an already hot housing market, which is ushering in a return to bidding wars.

With regard to how much rates might move, it’s not totally clear since the coronavirus outlook can change in an instant.

As it stands now, the 30-year fixed is averaging 3.49%, which is just 18 basis points (0.18%) above its all-time low, per Freddie Mac data.

It wouldn’t take a whole lot for rates to test new historic lows given the fear and uncertainty at the moment.

Conversely, mortgage lenders will be quick to adjust their rate sheets higher if there’s any glimmer of good news on the topic.

Remember, with rates already so low, it’s harder for them to move even lower than it is for lenders to stand put or simply increase them.

Read more: Why It Might Be Better to Apply for a Mortgage When Things Are Slow

Don't let today's rates get away.
About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

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Watch Out for Low Mortgage Rates You Have to Pay For

Posted on November 4th, 2020

Mortgage rates keep on marching lower and lower, with new records broken seemingly every week.

But with all the fervor surrounding mortgage rates, some lenders are playing the “how low can we appear to go” game.

For example, mortgage lenders may be talking about their lowest rates (with multiple points required), as opposed to offering their par rates, the latter coming at no extra cost to the consumer.

So instead of being presented with a mortgage rate of say 2.75% on a 30-year fixed, you may see a rate as low as 1.99%. Or even a 15-year fixed at 1.75%!

Here’s the problem; with mortgage rates breaking record lows time and time again, 10+ times so far in 2020, many homeowners are finding the need to refinance the mortgage twice. Or even three times.

And those who chose to pay points at closing, only to refinance within months or a year, essentially left money on the table.

Or they decide not to refinance to an even lower rate, knowing they’ll lose that upfront cost that’s already been paid, which is also a tough situation.

Mortgage Rates Aren’t as Low as They Appear

  • In order to advertise lower mortgage rates lower than the competition
  • Lenders will often tack on discount points to their publicized rates
  • Meaning you’ll have to pay a certain amount upfront to obtain the low rate in question
  • Make sure you’re actually comparing apples to apple when mortgage rate shopping

Guess what? That absurdly low mortgage rate you saw advertised isn’t really as low as it seems.

Typically, when you see a rate that’s beating the pants off the national average, and all other lenders, mortgage points must be paid.

And when the rate is really, really low, it usually means multiple mortgage points must be paid.

In other words, you wind up paying a substantial amount of money, known as prepaid interest, to secure an ultra low, below-market interest rate.

Assuming your loan amount is $200,000, two points to obtain a rate of 1.99% on a 30-year fixed would set you back $4,000.

If the loan amount were $400,000, we’re talking $8,000 upfront to secure that super awesome low rate.

Tip: Watch out for lenders and mortgage brokers who quote you a low mortgage rate, but neglect to tell you that you must pay a point (or two) upfront to obtain it.

Often, this tactic is employed to snag your business, and once you’re committed, the truth comes out, which is why mortgage APR is so important.

Is Paying for an Even Lower Mortgage Rate Right Now the Smart Move?

  • When mortgage rates are already really low (record lows at the moment)
  • It becomes somewhat less attractive to pay points at closing
  • It could be pretty expensive to get just a slightly lower rate that will save you very little
  • And your money might be better served elsewhere, especially if inflation worsens

Here’s the thing. Mortgage rates are already so low that paying mortgage discount points to go even lower isn’t all that attractive.

There’s a great chance mortgage rates will surge higher in the future as inflation finally rears its ugly head. And at that point, you’ll already have an insanely low interest rate.

On top of that, you’ll be able to invest your liquid assets in other high-yielding accounts, likely something pretty darn safe with a rate of return that will beat your low mortgage rate.

So why keep going lower and lower if you’re already paying next to nothing on your home loan?

Additionally, you won’t want to spread yourself too thin, especially if you’re buying a new house.

There are a ton of costs associated with a new home purchase, so committing all your liquidity to an even lower rate could mean that you won’t have money for relocation costs, furnishings, necessary repairs, or an upgrade.

And as mentioned, mortgage rates do have the potential to move even lower than current levels, meaning it could make sense to refinance again, favoring those who didn’t pay much to anything at closing.

Or better yet, just went with a no cost refinance to avoid paying anything to the bank or lender.

As always, do the math to see what makes sense for you. If you’re super serious about paying off your mortgage early, then buying down your rate could be the right move.

It will certainly vary based on your unique financial situation, the loan amount, the cost to buy down the rate, and how long you plan to stay with the loan/home.

Certainly take the time to compare mortgage rates with and without points, but don’t just chase a low rate below an emotional threshold, like 2%.

And determine how long it’ll take to pay back any points at closing with regular monthly mortgage payments.

Personally, locking in a 30-year fixed rate below 3% seems like a tremendous bargain.

Investing the money elsewhere, such as in stocks or bonds or wherever else, could end up being a lot more rewarding than paying prepaid interest at closing.

Perhaps more importantly, you’ll have access to that money if and when necessary for more pressing matters.

Lastly, you can always pay extra each month if and when you choose to reduce your principal balance and total interest paid. So that’s always an option regardless of the rate you wind up with.

Read more: Are mortgage points worth the cost?

Don't let today's rates get away.

Source: thetruthaboutmortgage.com

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USA Mortgage Review: #1 Mortgage Lender in Missouri?

Posted on November 17th, 2020

If you live in the USA and need a mortgage, perhaps you’ve thought about applying at “USA Mortgage.” Makes sense, right?

It just so happens that USA Mortgage is located right smack in the middle of our fine country, in St. Louis, Missouri to be exact. Well, that’s pretty darn close to the midpoint…

Anyway, geography aside, they’ve been around for about 20 years now and actually operate under the name DAS Acquisition Company, LLC, which purchased the lender when it was a distressed company.

Today, it’s the largest privately held mortgage banker in the state of Missouri and employs more than 750 licensed loan officers and operations personnel.

Technically, USA Mortgage is a full-service mortgage broker, meaning they can offer loan programs from various lender partners at wholesale prices.

USA Mortgage Fast Facts

  • Employee-owned direct-to-consumer mortgage lender located in St. Louis, MO
  • Founded in 2001 by current president and CEO Doug Schukar
  • Originally acquired as a distressed asset by DAS Acquisition Company, LLC
  • Has been #1 mortgage lender in metro St. Louis since 2012
  • Funded nearly $2.5 billion in home loans during 2019
  • More than half of total loan volume came from their home state of Missouri
  • Currently licensed to do business in 41 states and D.C.

If you live in Missouri, there’s a good chance you’ve heard of USA Mortgage. They did more than half their business in The Show-Me State last year.

They also funded hundreds of millions in mortgages in the states of Texas, Washington, and Ohio.

At the moment, they’re licensed in 41 states and the District of Columbia.

They don’t appear to be available in Delaware, Hawaii, Montana, Nevada, New York, North Dakota, South Dakota, Vermont, or Wyoming.

How to Apply for a Home Loan with USA Mortgage

  • You can apply for a home loan directly on their website in minutes without human interaction
  • Or get in contact with a loan officer at one of their many branches nationwide
  • Their digital mortgage application is powered by fintech company Ellie Mae
  • They also offer a free smartphone app that lets you complete most tasks remotely

It’s super easy to apply for a home loan with USA Mortgage. Simply surf on over to their website and click on “Apply.”

From there, you’ll need to fill in a digital mortgage application powered by Ellie Mae.

You can complete much of the process online, including the ordering of a credit report and the eSigning of disclosures.

If you are currently working with a loan officer, there is a box you can check, at which point you’ll be able to select that individual.

If not, simply click the “no” box and someone will be assigned to you automatically.

Once your mortgage application is submitted, you’ll receive status updates about loan progress and a to-do list for remaining conditions.

It’s also possible to download the free USA Mortgage smartphone app, which allows you to run calculations, scan and upload docs, contact your loan officer, and check loan status.

All in all, USA Mortgage provides a digital process from start to finish that is both convenient and easy to follow.

Loan Types Offered by USA Mortgage

  • Conventional loans backed by Fannie Mae and Freddie Mac
  • Government-backed loans: FHA, USDA, and VA loans
  • Jumbo home loans
  • Home renovation loans (203k, VA renovation, and Fannie Mae HomeStyle)
  • New construction loans
  • Bank statement programs (stated income)
  • Reverse mortgages
  • Doctor mortgages
  • Bridge loans
  • State bond programs, down payment assistance
  • Non-warrantable condos are OK

In terms of loan programs, USA Mortgage offers the whole gamut from conventional loans to government-backed loans and even bank statement programs (a newer version of a stated income mortgage).

You can get financing on a primary residence, second home, or an investment property.

It’s possible to take out a home renovation loan, such as a FHA 203k, or a new construction loan if you’ve got the lot but have yet to build the property.

Seniors who are 62 years of age and older can also take out a reverse mortgage in order to tap equity without monthly payments.

They also got a lock and shop program that allows you to lock in a mortgage rate up to 120 days in advance with no upfront lock fees.

You can choose between all the popular fixed-rate and adjustable-rate mortgage options available on the market today, such as 30-year or 15-year fixed, or a 5/1 and 7/1 ARM.

USA Mortgage Rates

USA Mortgage does not advertise its mortgage rates on its website or elsewhere to our knowledge.

In order to get pricing, you’ll need to contact a loan officer directly and/or begin the loan application process.

If on the USA Mortgage website, simply click on “branches” to find a loan officer near you, then you’ll find their contact info to inquire about pricing.

The same goes for lender fees – once you reach out to someone, ask them what fees they charge when comparing mortgage rates, such as a loan origination fee if applicable.

You should know both the interest rate and lender fees, which collectively make up the mortgage APR, an important figure to use when shopping lenders.

USA Mortgage Reviews

USA Mortgage has a pretty amazing 4.98-star rating out of 5 on Zillow based on more than 2,500 customer reviews.

Clearly that’s quite impressive given the number of reviews and the near-perfect rating.

Similarly, they have a 4.90-star rating out of 5 on SocialSurvey from over 30,000 reviews. Again, pretty close to perfection here.

They are Better Business Bureau accredited, and have been since 2010, with a current ‘A+’ rating based on complaints history.

All in all, they appear to offer stellar customer service to their clients, which would explain the almost-perfect scores they enjoy on several ratings websites.

Another plus is the wide range of loan programs offered, along with their access to wholesale mortgage rates.

USA Mortgage Pros and Cons

The Pros

  • Can apply for a home loan directly from their website without a loan officer
  • Offer a digital mortgage loan process
  • Tons of different loan programs to choose from
  • Excellent reviews from past customers
  • A+ BBB rating (and an accredited company)
  • Free mortgage calculators
  • Free smartphone app

The Cons

  • Not licensed in all states
  • Do not publicize mortgage rates or fees
  • Do not service their own loans
Don't let today's rates get away.

Source: thetruthaboutmortgage.com

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Mortgage Rates vs. a Potential War with Iran

Last updated on February 5th, 2020

Well, it’s a new year and it certainly didn’t begin quietly. Might as well address the elephant in the room when it comes to your mortgage.

This isn’t the first time I’ve discussed the possibility of war and its impact on mortgage rates, with the last discussion centered on the Syrian conflict back in 2013.

At that time, the 30-year fixed mortgage was roughly 4.50% on average. As the drama unfolded, rates fell about 30 basis points in a matter of months before climbing back to where they started.

That’s the most recent example, though it might not be the best indicator of things to come because the adversaries are different, as is the scenario.

How an Iranian Conflict Would Affect Mortgage Rates

First off, we aren’t at war with Iran, at least not formally. Some argue that we’ve been at war with Iran for decades, via a cold war involving its proxies.

Secondly, that may not change as a result of the strike that took out their leading general, Qasem Soleimani.

While the rhetoric has certainly ratcheted up in recent days, nothing has materialized yet other than more threats.

There is a good chance Iran will take retaliatory action, but what action it takes will likely be the driving force behind any changes to mortgage rates.

Simply put, fear leads to lower interest rates as investors flee the stock market, which is traditionally riskier, to the bond market, which is known as a safe haven in times of turmoil.

When that happens, bond prices rise and their yields drop, and with them mortgage rates. At least, that’s the long-held theory.

It tends to work out that way, though it doesn’t all happen in a vacuum. It depends what else is going with the economy too.

Still, geopolitical events can take center stage and make a big impact in a short amount of time. The question is whether they have enough staying power to dent longer-term trends.

As I noted in my 2020 mortgage rate predictions post, opportunities were likely to present themselves, thanks to the ongoing Trump impeachment, trade war with China, and Brexit.

There Was Already Downward Pressure on Mortgage Rates Before Iran

Now we’ve been thrown another serious curveball in the way of a potential war with what many view as a much fiercer foe than Syria or Iraq.

As a result, mortgage rates have already dropped about an eighth of a point, with most pundits expecting even lower rates as this all unfolds.

Again, nothing has happened yet, in terms of retaliation, so we’re in a bit of a holding pattern, but rates were under pressure to stay or move lower before this materialized.

We already had a long list of catalysts with the potential to move rates lower, and now we’ve got an even bigger one.

Mortgage rates are pretty darn low as it stands, averaging around 3.75% for the 30-year fixed.

The all-time low is 3.31%, achieved back in late 2012 per Freddie Mac data. If this Iran situation gets particularly ugly, we could certainly revisit or even surpass those lows.

But it really depends what transpires. When we invaded Iraq in early 2003, mortgage rates bounced all over the place.

They were as low as 5.23% and as high as 6.26% in just a matter of months.

I wouldn’t be surprised if we see similar volatility in 2020, which again, will present opportunities to those in a position to pick and choose their mortgage closing date.

Longer term, a real (hot) war could actually lead to inflation and higher interest rates, though that outcome is hopefully a lot less likely.

In summary, the fear of what is to come will probably drive mortgage rates lower in the short term. But once reality sets in, rates may return to prior levels.

Iran aside, there’s still plenty of other stuff that has the ability to make a big splash in 2020, so be sure to keep a close eye on the news if you’re in the market to get a new mortgage.

Don't let today's rates get away.
About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

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It’s Taking a Really Long Time to Get a Mortgage Right Now

Posted on November 23rd, 2020

Similar to the increased waiting times to get a COVID-19 test these days, it’s taking an extended amount of time to get a mortgage to the finish line.

The reason is simply unprecedented demand, just like those COVID-19 tests. The more people that need one, the longer the wait, period.

This is the downside to record low mortgage rates, which while undoubtedly great for homeowners, mean mortgage lenders are absolutely slammed.

Average Time to Close Now 54 Days

oct 2020 originations

  • Home loans are taking a lot longer to close due to unprecedented demand
  • It now takes 54 days for a home loan to fund, up from 44 days a year ago
  • While purchases are taking a similar amount of time to close, refis have slowed by nearly three weeks
  • Expect your mortgage refinance to take almost two months from start to finish

While you might see advertisements telling you it’s possible to get approved for a mortgage in just minutes, that’s very different than actually closing a home loan.

Sure, you can get the ball rolling right away, maybe get a fairly solid mortgage pre-approval that has been run through an automated underwriting system the same day.

But in terms of your loan actually making it to the funding table and getting recorded, the timeline might be closer to two months than 10 minutes.

The latest Origination Insight Report from Ellie Mae revealed the average time to close all home loans increased to 54 days in October, up from 51 days in September.

Broken down by transaction type, it took 48 days to close a purchase loan in October, up from 47 days in September, and 57 days to close a refinance loan, up from 54 days in September.

For perspective, it took an average of 42 days to get a home loan closed six months ago, and 44 days a year ago.

Back in April, a refinance took just 39 days, while a home purchase took 46 days. So while purchase loan closing times have held fairly steady, refis are taking nearly three weeks longer on average.

In other words, be patient and expect it to take a while, regardless of all the cool new technology you’ve seen and heard about.

Yes, it’s easier to get a mortgage these days thanks to digital mortgage applications, including those powered by Ellie Mae themselves, but that doesn’t necessarily mean the process goes much faster.

It just means you’ll get tasks done quickly, then spend a lot of time twiddling your thumbs while home appraisals get scheduled and your loan makes it through underwriting and on to the funding department.

Mortgage Rates Fall Below 3% for First Time

  • The average mortgage rate on a closed loan fell below 3% for the first time ever
  • The 30-year note was 2.99% in October, down from 3% a month earlier and 3.94% a year ago
  • VA loans had an average rate of 2.75%, while conventional and FHA loans averaged 3.01%
  • Expect this number to dip even lower as rates have fallen over the past couple months

Ellie Mae also noted that mortgage rates fell below three percent for the first time since the company began tracking such data back in 2011.

Again, this explains why those wait times to get a mortgage have increased so much.

The report revealed that the average 30-year fixed note rate was 2.99% in October, down from 3% in September and 3.94% a year earlier.

By loan type, it was 2.75% for a VA loan, and 3.01% for both a conventional loan and FHA loan.

Combined, that was enough to push the average interest rate on a closed loan below 3%.

My expectation is this number will continue to fall as mortgage rates have only moved lower in recent months, and the data lags.

In summary, patience is a virtue right now when it comes to just about anything, including home loans.

And remember, aside from it being difficult (by human nature) to wait, mortgage lenders also tend to keep rates elevated when demand is super high.

So it could actually pay to wait to apply for a refinance until things calm down – the only dilemma there is if rates happen to rise during that time.

Don't let today's rates get away.
About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for nearly 15 years.

Source: thetruthaboutmortgage.com

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Buying a Home in 2021? 11 Tips to Get It Done!

If you’ve yet to enter the housing market, but are thinking of buying a home in 2021, there’s a lot you need to know.

As I once pointed out, this isn’t your older sibling’s housing market. Not just anyone can get a mortgage these days. You actually have to qualify. But we’ll get to that in a minute.

Let’s start by talking about home prices, which have soared in recent years. The good news is mortgage rates remain very low, and may even break new record lows this year, which can keep affordability within reach.

1. Prepare for More Sticker Shock

Yes, if you’re prepping to buy a home in 2021, expect to be shocked, and not in a good way. At this point in the cycle, home prices have eclipsed old all-time highs in many parts of the country.

And even if they haven’t yet, there’s a good chance you’ll be paying more than the Zestimate or Redfin Estimate for the property in question due to limited inventory and strong home buyer demand.

The bad news for renters is home prices are expected to rise another 10% this year, so things are just getting more and more expensive.

In short, expect to shell out a lot of dough if you want a home in 2021, and that could often mean paying over asking price, even if the original list price seems high.

2. Get Pre-Approved for a Home Loan Early

Speaking of that home being out of your price range, you may want to get pre-approved with a bank or mortgage lender ASAP.

First off, real estate agents won’t give you the time of day without one, especially in a red-hot market.

And secondly, if you don’t know how much house you can afford, you’re basically wasting your time by perusing listings and going to open houses.

This is especially true if the homes you’ve got your eye on are consistently going above asking since you’ll need even more purchasing power.

It’s not hard or all that time consuming to get a mortgage pre-approval, and it’ll give you more confidence and perhaps make you more serious about finally making the move.

Tip: Look for an online mortgage lender that lets you generate a pre-approval on the fly in minutes (and know you don’t have to use them if and when you proceed with a purchase!).

3. Check Your Credit Scores and Put Away Your Credit Cards

While you’re at it, you should check your credit scores (all 3 of them) and determine if anything needs to be addressed.

As I always say, credit scoring changes can take time, so give yourself plenty of it. Don’t wait until the last minute to fix any errors or issues.

And while you’re addressing anything that needs more attention, do yourself a favor and put the credit cards in the freezer (or somewhere else out of reach).

Lots of spending, even if you pay it back, can ding your scores, even if just momentarily. It can also increase your DTI ratio and limit your purchasing power. Ultimately, bad timing can create big headaches.

Additionally, pumping the brakes on spending might give you a nice buffer for closing costs, down payment funds, moving costs, and renovation expenses once you do buy.

4. Housing Inventory Will Be…Limited

It’s the same story in 2021 as it was in 2020, 2019, 2018, and heck, even as far back as 2012. There’s really been a lack of inventory since the housing market bottomed because homes were never for sale en masse.

During the prior housing crisis, borrowers got foreclosed on or deployed real estate short sales to move on, and banks made sure all that inventory never flooded the market.

Now we’ve got would-be sellers with nowhere to go, thanks to the massive price increases realized in the past few years. It’s hard to move up or downsize, so a lot of folks are staying put. That means less choice for you.

While we saw an uptick in inventory in 2019, it appeared to be short-lived and now housing supply is at an all-time low!

With near-record low interest rates and lots of Americans hitting the ripe first-time buyer age of 34, expect competition to intensify.

Again, this supports the argument of being prepared early so you’re ready to make an offer at a moment’s notice!

5. That Home Might Be a Fixer

You probably don’t have the same skill set as Joanna and Chip Gaines, but you might still wind up with a fixer-upper thanks to those inventory constraints. And that’s totally okay.

What I’ve learned from buying real estate is that you’ll typically never be content with the upgrades previous owners or developers make, even if they were super expensive and high quality. So why pay extra for it?

There’s a good chance you’ll want to make the home yours, with special touches and changes that distance yourself from the previous owner.

Don’t be afraid to go down that road, but also know the difference between superficial blemishes and design challenges, and even worse, major problems.

Especially this year, watch out for money pits that sellers can finally unload because real estate is just so very hot.

Those properties that could never sell may finally find a buyer, and you might not want that buyer to be you.

6. You May Have to Fight for It

What’s even more annoying is that you may have to fight to get your hands on the few properties that are out there, depending on the housing market in question.

In popular metros, bidding wars will still take place, and they even become the norm again as they were in previous years.

If the property is popular, there will always be someone willing to outbid you for that home they just must have. This is another reason why the fixer can be a winner, the hidden gem if you will.

That being said, it’s okay to pay more than asking (or even the fully appraised value), just keep in mind that there are plenty of fish in the sea.

Well, perhaps not plenty right now, but there’s always another opportunity around the corner.

Stay poised and don’t let your emotions get the best of you. Like anything else, it’s okay to walk away. Trust your gut.

7. Still Negotiate with the Seller

Just because 2021 will be a seller’s market once again, at least in popular markets, doesn’t mean you can’t negotiate. You can still get into a bidding war, win the thing, and then inspect the heck out of the house.

Inspections are key to determining what will need to be addressed once the home changes hands, and what the seller will need to do to compensate you for those issues.

If you don’t get a quality inspection (or two), you will have a difficult time asking for credits for closing costs or even a lower purchase price. Take it very seriously, the return on investment can be staggering.

Also know that in some markets, buyers may have the upper hand in 2021. Not all real estate markets are red-hot anymore, so you might be able to bid below asking and still get money for repairs.

8. Do Your Mortgage Homework

While you might have your hands full with an overzealous real estate agent, it’s important not to neglect your mortgage homework.

Mortgages are often just mailed in, with little attention given to where they are originated.

Your real estate agent will have their preferred lender that you “really should consider using because they’re the best,” but you don’t have to use them or even speak to them.

I’ll typically say get a quote from them as a courtesy to keep things amicable, and to appease your agent, but also shop around with other banks, credit unions, lenders, and mortgage brokers.

At the same time, think about how you want to structure the mortgage, including down payment, loan type (FHA or conventional), and loan program.

The 30-year fixed isn’t always a no-brainer, though right now it’s a tough argument to go against it.

There are other loan programs that can make sense too, such as the 5/1 ARM, which often get swept under the rug. Make the choice yourself.

9. Expect a Very Good Mortgage Rate

If you’ve done your homework and are in good financial shape, you should be able to get your hands on a very low mortgage rate in 2021.

In fact, mortgage interest rates are historically amazing at the moment and could even reach new depths depending on what transpires this year.

Once again, the 2021 mortgage rate forecast looks excellent, so they may stay put for awhile longer or even hit new all-time lows.

In terms of financing, it’s still a great time to buy a home. Consider that the silver lining to an otherwise pricey and competitive housing market.

Of course, with home prices creeping higher and higher, even a low interest rate may not be enough to offset that growing monthly payment.

So always make time to shop to ensure you get the best rate and the lowest fees, even if financing is on sale.

Just because rates are cheap doesn’t mean you should just accept what’s thrown in front of you. Still complain, still negotiate, still ask for more!

10. The Best Time to Buy Might Be Later in the Year

Before you get too excited, or worried that time is running out, it might actually be in your favor to slow play this one.

Per Zillow, the best time to buy a home may be in late summer, including the months of August and September.

Basically, you’ve got the slow, cold months at the start of the year where there isn’t much inventory, followed by the strong spring housing market where everyone and their mother wants to buy.

Then you get a lull and perhaps even a dip in home prices during summer, which could be an attractive entry point.

You might even get lucky and snag a price cut with a lot less competition while other prospective buyers are on vacation.

That being said, get pre-approved NOW and set up your alerts for new listings ASAP and just be ready to pounce whenever.

11. Are You Sure You Want to Buy a Home?

Lastly, take a moment to ensure you actually want to buy a home as opposed to continuing to rent.

I constantly hear the old “throwing away money on rent” line and it never gets old. Then I proceed to fantasize about renting with not a care in the world.

Are you sure you’re throwing away money on rent? Renting can be pretty awesome.

You don’t pay property taxes, homeowners insurance, HOA dues, PMI, or mortgage interest. And you can leave whenever you want. That sounds like a sweet deal too.

Oh, and if anything goes wrong, you can just call your landlord or property management company.

With a home, the problem is yours, and yours alone to deal with. Broken water heater? You’re paying thousands out of pocket, not the landlord.

Consider the Effects of COVID-19

One extra thing to consider given the ongoing COVID-19 pandemic that reared its head last year.

As you might expect, it’s making the home buying and selling process a bit more complicated than usual, despite companies learning to adapt.

For example, home sellers are more reluctant to hold open houses or let anyone in their home, and prospective buyers are probably also a bit apprehensive entering a stranger’s house.

But it’s still very important to get a good look at a property you’re considering buying. The same goes for the home inspection and the home appraisal.

Both should still be taken very seriously, even if more difficult to complete.

A home purchase doesn’t necessarily have to be put on hold due to COVID-19, but it might require more thought given the increased uncertainty with the economy, demographic shifts (city vs. suburban living), and so on.

Also, think before you make a complete lifestyle change like moving out of the city and into the country, just because it’s on-trend. You might look back in a year or two and say what was I thinking?!

Ultimately, you should always give a home purchase a ton of thought though, so for me not much has changed.

Read more: When to look for a house to buy.

Don't let today's rates get away.

Source: thetruthaboutmortgage.com

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