WHY BEING “READY” FOR THE SPRING MARKET IS SO IMPORTANT
Spring is here, and as we have all known it to be in years past … the busiest of season in real estate. So, if you are looking to buy or sell a home right now, here’s my advice to you …. Get ready!
Let’s look at where we are in the world of real estate, specifically as it pertains to our local market. If you are a buyer currently looking to secure a home in this market, you are very well aware of how competitive it is. “The ongoing supply and demand imbalance has created a dynamic where more buyers are competing
for fewer properties, inciting bidding wars and sending prices higher. Sellers are still enjoying market conditions where they can maximize the value of their properties, and we encourage those still weighing whether to list to take advantage of this market while they can.” states Paul Bruenich, in our First Quarter Market Watch.
Yes, we are still seeing multiple offers in our market – if a home is price correctly, with no major objections – there is a great likelihood the seller will receive multiple offers. Good news for sellers, as supply & demand” or lack thereof – is what is keeping home prices stable, and in many areas have shown an increase in value. This factor alone is the driving force that is keeping it still a seller’s market.
Having said that, there some sellers who may be “waiting” for interest rates to come down before they put their home on the market, in order for it to make sense for them to “make their move,” given the fact that for many, their current interest rates are much lower than where they are today. With that in mind, I would certainly advise sellers to look at the BIG picture. What is the motivation for their move? Are they retiring, downsizing, getting married/divorced, moving closer to family? There are many life events that would make home sellers want to sell their home. Having those conversations on what those goals are and how to achieve them is all a part of the process, to put perspective on whether it makes sense to “wait” or not, in the grand scheme of things.
The point of this writing is not to speak to doom and gloom to buyers, because that is so not me. But rather speak to – this is where we are, so how can you as a buyer best position yourself in the market in getting your offer accepted, or as a seller managing both the sale/buy of their home. That’s where I come in … as I council my buyer clients at first meet, and beyond, my best advice to them is always … if you are looking to secure a home in this competitive market you need to have a plan, and “be ready” to make as strong as offer as you can, in hopes that your offer will stand out from all the rest. And when I say “be ready” – I mean, first and foremost – you need to get your finances in order in preparation of your mortgage loan application, so you have a sense of what you would be approved for in way of a home mortgage. Then you can focus on your home search that is within the price point you are comfortable with. Then, once you you are pre-approved/approved by a reputable lender, you will be “ready” to make that offer. If you have been shopping around for a while, make sure your approval or pre-approval letter is current in hand to submit with your offer. I will say having an “approval” letter gives you your best shot at competing against all those other buyers. Having an “approval” letter makes you as close to being a “cash” buyer, without having the cash in the bank if you will. Having an approval letter means, you as a buyer have already gone through the mortgage underwriting process – so the only thing left to do is to attach a property to that approval, appraisal, and clear title. There is no worry to the seller about the buyer not being approved for their mortgage, since they have already been “approved.” Not all banks offer this type of approval, but they are becoming a bit more common to give buyers an upper hand in this competitive market.
Having said all that, might I also preface it by saying … having an experienced “Buyers Agent” who knows how to use best practices and strategies to present and negotiate their clients offer to sellers’ acceptance, is just another important key factor in buyer representation.
Just a snapshot of the mortgage application/approval process …
Pre-Approval
Pre-approval gives you a sense of how much a lender is willing allow you to borrow for your home loan. To determine that number, you will need to complete an application so that the lender can look at your financial history. Below are some of the things they look at, that can have an impact, according on your credit worthiness.
• Your debt-to-income (DTI) ratio: This is how much money you owe divided by how much money you make. Usually, you can borrow more if you have a lower DTI.
• Your income and employment status: Lenders are looking to verify you have a steady stream of income coming in, so they feel confident in your ability to repay the loan.
• Your credit score: If your score is higher, you may qualify to borrow more – but that doesn’t mean you have to borrow more. “Go with you own comfort when it comes to your monthly mortgage payment. You don’t want to be house rich, cash poor.”
• Your payment history: Do you consistently pay your bills on time? Lenders want to know you’re not a risky borrower.
Approval
Approval – is everything above and more. Getting a loan approval takes it a step further. After completing all the above steps, your file goes through underwriting for their review and approval. That is usually the “last step” before you get your clear to close on the property. The only difference here is that you have not chosen a property yet to attach the loan to. So having this “Approval “letter attached to your offer tells sellers – you are a ready and able buyer – (in essence – cash in hand) and can close quickly. So, you can see how much more viable a buyer you are in having an “approval vs. a pre-approval” when it comes to a seller reviewing offers (should there be multiple) – yours vs another buyer who still has to go through the entire process in hopes of getting their loan approved. I don’t know about you – but as a seller, I would give serious consideration to the buyer who has been through the process and has their approval already in hand!
After the lender reviews your application, you will get a pre-approval letter showing how much you can borrow in way of a home loan. Having this peace of mind alone is a big deal – it helps you feel a lot more confident in your ability to get a home loan, and it also helps you and your REALTOR® narrow down your home search that will be within your budget.
One last tip your lender will share with you, I’m sure … after you have received your pre-approval and or approval letter, he/she will advise you to avoid switching jobs, applying for new credit cards or other loans, co-signing for loans, or moving money in or out of your savings, as any changes to your finances can affect your approval status.
It has been a bit challenging for buyers no doubt, and spring market will certainly not make it any easier. Get ready and be prepared to put your best foot forward towards homeownership. It is a competitive season, and emotions can run high if you find yourself up against other buyers. Knowing your budget and having a REALTOR® who knows their market, and the experience to help guide you through the process will be your key to real estate success.
Reach out to me if you are just at the beginning process of your home search. I can connect you with a reputable lender who will guide you through the process and get you on the fast and right track towards home ownership.
Next issue of Insights will speak more to why being “ready” as a seller this spring market is so important. Stay tuned …
In case you missed it … First Quarter Market Watch
Laura
The Key To Your Real Estate Success
Helping buyers & sellers achieve their real estate goals.