BOSTON—As interest rates climb and the number of mortgage applications plunge, one Boston-based realtor says things are looking a lot better for prospective home buyers.
“We’re seeing a lot of inventory come on the market. There’s definitely less closing and more properties that are not going under agreement,” realtor Mike Urban said.
The long-term U.S. mortgage rate dipped back under 7 percent this month, one day after the Federal Reserve raised its benchmark borrowing rate to its highest level in 15 years. Mortgage buyers Freddie Mac reported Nov. 3 that the average rate for a 30-year mortgage was 6.95 percent. The rate was 3.09 percent last year at this time.
“I don’t think all of Massachusetts will be a buyer’s market but certain areas certainly are becoming that way,” Urban said.
Urban explained the advantages of buying a home in a high interest rate market in his video, Are We Finally in a Buyers Market?
SELLER-PAID CLOSING COSTS
Urban says it might sound like a foreign concept, but sellers are beginning to pay for closing costs again.
“It can be anywhere from three percent all the way up to six percent,” Urban said. “This is something we haven’t seen in the last two-plus years. I currently have contracts right now where the seller paid closing costs.”
SELLER-PAID RATE BUY DOWN
According to Urban, this is a newer concept where the seller of a home credits a portion of their proceeds to the home buyers, also known as a seller concession. Seller concessions can also be used to pay mortgage points and buy down the interest rate.
“You can get a lower rate for up to two years. Some lenders may have different programs,” Urban said. “Instead of getting your closing costs paid for, you can use it to buy down your rate.”
CONTINGENCIES AND SELLER-PAID REPAIRS
Whether it’s for an inspection, appraisal or mortgage, Urban says buyer contingencies are coming back in a big way.
“People are starting to do inspections again,” Urban said. “A lot of people aren’t waiving inspections because they don’t have to.”
Urban said he’s also starting to see more sellers making repairs or giving a credit back for those repairs.
“That is something I have not seen in probably over two years,” Urban said. “The reason they’re doing that is not necessarily because they desperate, but they see what is going on with the market.”
MULTIPLE LOAN TYPES
Urban said during the pandemic, it made a difference what kind of loan you had. Conventional loans and cash reigned supreme, but Urban said he’s starting to see more VA home loans and FHA home loans get accepted.
“The reason these loan types are returning is because places are sitting on the market. The longer they’re on the market, the more things open up to you as a buyer. One of those things is obviously the loan type.”
Urban recommends talking to your lender if you want to apply for a VA or FHA loan.
LESS MONEY DOWN
For a long time, how much cash you put down was as important as the loan itself, but Urban said not anymore.
“There’s a big misconception out there that people need a 20 percent down payment. They used to need that to get accepted,” Urban said. “Now we’re seeing buyers put 3.5 or five percent down. They’re using the rest of that money to buy furniture, to do renovations, to do whatever. That is another benefit of the market we’re heading into for buyers.”
NEGOTIATING SALE PRICE
Urban says if you all have of the attributes of a 2021 buyer—a 20 percent down payment, conventional loan, waived inspections—you could potentially save a lot of money on the actual sales price of the property.
“Now you can really negotiate the sale price down,” Urban said. “The cleaner your offer is, the more negotiable the seller is going to be.”
TIME TO THINK
Shopping for a house during the pandemic could be scary, stressful and frustrating. With more inventory on the market, Urban says buyers can afford to slow down and think about what they’re doing.
“The higher interest rates have relieved a lot of the stress,” he said. “You don’t have to make rash decisions. You are going to pay more money for your home than if you had paid two years ago, but focus on what you’re gaining by having that higher rate.”
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