Rates are rising fast and that’s obviously no fun. We understand all the pain points real estate agents and buyers are going through right now. Higher rates have changed many dynamics, and so I would like to suggest some proactive strategies that you, as an agent, and as a borrower/buyer, should pay attention to.
If the deal has dragged on for a period, and rates were not locked in, get “re-qualified and approved.” Why? Debt ratios may have been pushed higher, credit scores may have dropped, expected income or assets may have changed during the process. Avoid last-minute surprises.
As a buyer you are looking and as an agent you are taking your buyers around. Preventive medicine is the key. If you didn’t find a property yet, make sure that you are pre-underwritten and know that you can still lock a rate for 180 days, otherwise known as a lock and shop with an additional float down should rates move lower.
It’s logical that professionals involved on a residential real estate deal may not like last-minute surprises (like working with clients that can’t qualify at the last minute). Keep in mind that, if interest rates continue to rise, a buyer who locked in a rate may strategically be in a better position than buyers who didn’t.
Last—buyers are bidding up the prices, and, in some cases, without the comps to support value. That needs to be an up-front discussion. The questions that need to be asked are: (1) If the appraisal comes in low, are you willing to pay the gap between the purchase price and the appraised value? (2) Do you, the buyer, have the cash on hand to do so, or have access to the additional cash that may be needed? (3) Are you open to paying mortgage insurance? This will increase the monthly payment but may allow a buyer to buy the house that under appraised, but took them months to find.
“The future belongs to those who prepare for it today.”
Carl Guzman, NMLS# 65291, CPA, is the founder and president of Greenback Capital Mortgage Corp., a Zillow 5 star lender. He is a residential and reverse mortgage financing expert and a deal maker with over 26 years of industry experience. Carl and his team will help you get the best mortgage financing for your situation and his advice will save you thousands. Visit him at www.greenbackcapital.com or [email protected].
