Blog with MAE Capital

What is going on with Real Estate and Lending During these Trying Times?

December 1st, 2020 1:21 PM by Gregg Mower

If you have been in the market to buy a home in the last 5-8 months you have seen competition for homes to likes we have not seen since the sub-prime era of the early 2000s.  If you currently own a home and have been looking to take advantage of historically low-interest rates, but have found it has been taking far longer than you would have expected, you may be asking; what is going on?  Americans have been under the crushing fear of a virus that most know nothing about and the Government has been closing businesses and making people work from home for the last 8 months, so you would expect that things would be slow right?  Actually, quite the opposite.  With the Federal Reserve lowering and keeping long-term interest rates at historic lows those that have “essential jobs” are thriving and are looking to better their financial situation by refinancing to lower their payments or take cash out to do home improvements or sell and move up.  The combination of a hot Real Estate Market and low-interest rates are creating a strain on a system that is already overloaded.    So what’s going on?

Real Estate has been booming as people have been forced to work from home and are looking for those properties that better fit their family’s needs.  This is a dynamic that we have not really seen before as most of the time people prefer to live closer to where they work.  Now that work is from their living room, or spare bedroom, or even the kitchen table people are realizing that the space that has fit them before the Health Crisis no longer fits their needs.  Add children who have too distant learning to the equation and people have quickly found out that their existing living conditions could be better.    So we are finding people selling homes that they have outgrown and people buying homes that need more space for their family, this includes first time home buyers.  As renters are also experiencing the same restrictions, they see that buying a home becomes a better option and are now in the market as well.

That said, how do you get in the game, so to speak, to buy a home?  Most of all homes on the market today are being sold in the first few days of the listing being offered to the public with multiple offers.  How do you win your offer when there are so many others to compete with and homes selling well over the asking price?  My recommendation would be to make sure your offer looks clean, what I mean by that is to do your homework upfront and be prepared to not get the deal of the century but to accept that you will be offering over the asking price.  So, if you maximum price you qualify for is a certain number be prepared to factor in about a 3-7% upward margin.  Simply put if you are looking for a home listed for $400,000 be prepared to go as high as $420,000.  Hint: don’t start your search at the top of your price range go down 10% so you know you can compete.  Next make sure you are with a Mortgage Broker that can offer you the lowest rate possible, like MAE Capital Mortgage where we have negotiated lower rates with the lenders, we do business with.  If your rate is .25-.5% lower that can afford you up to $20,000- $50,000 more in buying power, so if you have been prequalified by a lender let MAE Capital check to see if we can do better and win your business and your new home for you.  Another tip to look at is the type of loan has a major part in the negotiating process as well.  A loan that offers the least amount of costs to a seller the better your chances are to get your offer accepted.  An example would be a conventional loan versus a VA loan.  Although we really want to help our Veterans out, sellers just care about the bottom line and with a VA loan the seller would have to pay some of your closing costs by the design of the loan and the seller would have to be able to provide a clear termite report where a conventional or FHA loan does not have those restrictions to the seller.  The less you have to ask the seller to pay for in this market the better your offer will look to the seller.  

Anyway, back to the conditions causing this manic moving trend and the plugs in the system and how to overcome them.  With the COVID ruling the land currently and the potential for the government to enforce another round of “stay at home orders”, “Home”, has become the magic word as we do not know how long this will be going on.  Combine this with a record volume of folks seeking low-interest rate home loans and it is a combination for frustration.  The volume of home loans in the system and the work from home orders are putting an additional strain on the lending industry as well.  Some of our major lenders located in states that have strict lockdown or social distance directives are forcing them to work from home as well.  The problem with this is the fact that so much of lending is done face-to-face within companies it is making timeframes take longer.  When an internal worker has to email their superior or underwriter or any one of the people that comprise the process flow of a lender it will take longer than simply standing up and walking down the hall to get an answer.   When we want the process to work as it has always worked and have expectations of consistency and don’t get it we become very frustrated, at MAE Capital Mortgage we have always strived for top-notch customer service and when we don’t get it from our partners we depend it becomes frustrating not only for us but our clients as well.  We all have to be patient during these trying times and the good news is that interest rates remain low and the Federal Reserve has vowed to keep them low for the coming year.

Where does this leave you if you are entering the process of buying a house or refinancing an existing home?   First and foremost, you have to be patient with the process then you have to be educated on the process and how you can best manipulate it into your favor.  The best way is to be prepared and has all your documents ready to provide your lender when getting pre-approved for a home loan or starting a refinance.   The items you will need to have to get approved for a home loan to purchase a home are; current paystubs for the last 30 days, 2019 Tax returns, 2019 and 2018 W2’s, last 2 months of bank statements, copy of your Identification cards (Driver’s license), if you are refinancing you will need to provide you current mortgage statement and a copy of your home owner’s insurance declaration page.   By having your documents ready to go you will go to the top of the heap to be looked at and get a much faster turn.  If you are purchasing a home be prepared to make an offer over the listed price of the home as discussed earlier.  Having the best partner to help you through the intricate maze will help considerably and here at MAE Capital Real Estate and Loan, we have special low-interest rates that we have negotiated with our lender sources, and with Realtors on staff, you can bundle your home loan and your Realtor to save you thousands of dollars.    We look forward to further helping you with your Real Estate and financial needs.        

 

Posted by Gregg Mower on December 1st, 2020 1:21 PM

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