BOSTON — As interest rates rise and mortgage applications fall, a Boston-based real estate agent says things are looking a lot better for potential buyers.
“We are seeing a lot of stocks coming into the market. There are definitely fewer foreclosures and more properties that are not in agreement,” said real estate agent Mike Urban.
The long-term US mortgage rate fell back below 7% this month, a day after the Federal Reserve raised its benchmark lending rate to its highest level in 15 years. Freddie Mac mortgage buyers reported Nov. 3 that the average rate for a 30-year mortgage was 6.95%. The rate was 3.09% last year at the same time.
“I don’t think all of Massachusetts will be a buyer’s market, but some areas are definitely becoming one,” Urban said.
Urban explained the benefits of buying a home in a high-interest market in his video, “Are We Finally in a Buyer’s Market?”
CLOSING FEES PAID BY SELLER
Urban says it may seem like a foreign concept, but sellers are starting to pay closing costs again.
“It can go anywhere from three percent all the way up to six percent,” Urban said. “It’s something we haven’t seen in the last two years. I currently have contracts where the seller has paid the closing costs.
REDEMPTION AT THE RATE PAID BY THE SELLER
According to Urban, this is a newer concept where the seller of a home credits a portion of their proceeds to homebuyers, also known as a seller’s concession. Seller concessions can also be used to pay mortgage points and reduce the interest rate.
“You can get a lower rate for up to two years. Some lenders may have different programs,” Urban said. “Instead of having your closing costs paid, you can use it to buy out your rate.”
CONTINGENCIES AND REPAIRS PAID BY THE SELLER
Whether it’s an inspection, appraisal or mortgage, Urban says the buyer’s contingencies are coming back strong.
“People are starting to do inspections again,” Urban said. “A lot of people don’t waive inspections because they don’t have to.”
Urban said he’s also starting to see more sellers making repairs or giving credit for those repairs.
“It’s something I haven’t seen in probably over two years,” Urban said. “The reason they’re doing this isn’t necessarily because they’re desperate, but they see what’s happening in the market.”
SEVERAL TYPES OF LOANS
Urban said during the pandemic, the type of loan you have makes a difference. Conventional loans and cash reigned supreme, but Urban said he was starting to see more VA home loans and FHA home loans accepted.
“The reason these types of loans keep coming back is because the places are on the market. The longer they are in the market, the more things open up for you as a buyer. One of those things is obviously the type of loan.
Urban recommends talking to your lender if you want to apply for a VA or FHA loan.
For a long time, the amount of money you deposited was as important as the loan itself, but Urban said that’s no longer the case.
“There’s a big misconception that people need a 20% down payment. They needed it to be accepted,” Urban said. “Now we see buyers putting 3.5% or 5% less. They use the rest of that money to buy furniture, do renovations, etc. This is another advantage of the market we are heading to for buyers.
SALE PRICE NEGOTIATION
Urban says if you have all the attributes of a 2021 buyer — a 20% down payment, a conventional loan, canceled inspections — you could potentially save a lot of money off the property’s actual selling price.
“Now you can really negotiate the selling price down,” Urban said. “The cleaner your offer, the more negotiable the seller will be.”
TIME TO THINK
Buying a home during the pandemic can 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.
“Higher interest rates have relieved a lot of the stress,” he said. “You don’t have to make rash decisions. You’re going to pay more money for your house than if you paid it two years ago, but focus on what you gain by having that higher rate.
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