The real estate market is in constant flux. For several months it may be a sellers’ market, and then it can quickly shift to give homebuyers the upper hand. In addition, mortgage rates play a significant role in how vibrant or stagnant the real estate market can be.
Megan Davis, AVP senior mortgage advisor at Park Bank, has seen some relief in the interest rates this year so far, but affordability is still a challenge, especially when coupled with the limited inventory and competition for homes.
“Having a home-buying strategy is super important, and collaboration of the banker, realtor and buyer has become really key to winning the offer and setting the buyer up for success financially,” Davis says. That means it’s important to obtain a fully underwritten preapproval and work through sales price and down payment scenarios as a team, so that the buyer and the realtor are able to put their best offer presentation forward.
From a financial perspective, the most important thing a buyer can do is create a budget.“Owning a home is worth making some sacrifices for, but you don’t want to feel crunched every month,” Davis says. “Be honest with yourself about where you spend and where you can tighten things up.”
A full preapproval will require pay stubs, W2s, bank statements, and, in some cases, tax returns. Be prepared to provide those to your banker. Moving money or consolidating bank accounts can complicate the process as well.
Also start working with a mortgage professional early. Even starting the preapproval process a month or two before you want to start searching for a home can alleviate some stress.
You’ll want to consider more than rate when choosing the best loan for you.
According to Davis, a fixed-rate loan is going to offer the most security, because the interest rate will stay the same for the term of the loan. A 30-year fixed loan has the same interest rate and payment for 30 years, and the payments are spread out over that time as well. A 15-year fixed loan will generally have a lower interest rate, but the payments are spread out over 15 years, so they’re going to be higher than the 30-year option. You can always pay extra toward your loan, but never less than the minimum, so the right loan program is going to be the one that gives you the monthly payment at or below the budget number you want to stay within.
“You’re always better off taking a 30-year loan and paying it off in 17 years than taking a 15- year [loan] and falling short each month,”Davis says.“Interest rates have the potential to rise and fall, so keep in close contact with your advisor to best strategize how those moves can impact or benefit your buying strategy.”
Park Bank
608.278.2801 | parkbank.com
