Did You Know The Mortgage Rates Dropped? But It’s Not The Most Important Thing

Ok, let’s be honest. Who doesn’t want the opportunity to purchase a home that’s snugly planted on your shortlist on your favorite home search platform at a highly attractive mortgage rate of, let’s say 2.5%? 

Literally everyone, it's most definitely the market seekers who were capable of purchasing back when rates were low, but chose to wait for the rates to bottom out.

And, to wait is a natural inclination, but it’s not always the best and here’s why.

The problem with that thought process is that the real estate market is notoriously unpredictable. We typically rely on historical trends to provide insight as to what's happening in the market and what could potentially be happening next. But, what happens if something out of pattern occurs? There’s a bit of an upset and a reset of a cycle of some sort.

So, what exactly is the reason you should never wait for rates to drop? Great question - the answer is the rate drops are generally relative to the state of the market and economy at a given time. 

According to Housing Wire, after a brief decrease in mortgage rates two weeks ago, rates steadily climbed again last week. The question now is whether this fluctuation will lead to an increase in new seller activity, or if we will have to wait until 2025 for home sales to finally recover.

It also points out a valid reminder - when considering investing in the market, there are more factors to keep in mind than the current mortgage rate. Here are a few.

Financial Preparedness

Regardless of the mortgage rate, if as a buying party, the decision isn’t being led by financial preparedness, the transaction is likely a bust from the start. Investing in real estate, whether for a primary or investment property, requires funding. Even if a transaction is being financed through a mortgage lender, there is a level of available funds that are required to qualify for financing. 

Not to mention, there are requirements within the process that require payment, such as:

Inspection: no matter how amazing a home is, how great of a deal that has been negotiated - never skip the inspection period without understanding the consequences. Significant concerns (short and long term) can be missed without an inspection.

Appraisal: the appraisal may be able to be paid at closing, but if not it’s due prior to. The cost of the appraisal and whether or not it can be paid with closing costs comes down to the lender. However, it’s still a required fee, especially if the property is being purchased via a government backed loan such as FHA, VA or USDA. Having an appraisal completed prevents paying more for a property than the market has deemed it worth.

Down Payment and Closing Costs: the financing processing will support a percentage of the process. Ex. FHA loans start at 3.5%, conventional loans are typically around 10%. The actual amounts can vary based on individual income and credit profiles. 

As well, these amounts are apart from the closing costs which essentially are associated fees and charges for originating the loan, lender fees and even escrow funds. Nonetheless, they are significant. 

Credit Preparedness

Outside of financial readiness, credit worthiness is of grave significance. It’s quite possible it is higher on the level of importance as when lenders are preparing to qualify a borrower, before they request validating information for the bank account, there is typically a request to complete the credit application to sort out a preliminary profile to see if the potential buyer can qualify. 

Additionally, the credit profile can unlock different financing products. Knowing where you stand in terms of credit helps prepare financially.

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NREMG Can Help With Buying (and Selling) Preparation

As the housing market continues to navigate through uncertain times, buyers and sellers must remain vigilant and adaptable to changing conditions. While there are signs of stability in certain market indicators, the potential for rapid shifts remains a possibility. Staying abreast of the fluctuating mortgage rates is important but there are other key factors. Prioritizing financial and credit preparedness alongside factors such as keeping a close eye on inventory levels, pending sales, and price reductions will be crucial in understanding the evolving dynamics of the housing market.

Dissecting the market can be quite a task, but you don’t have to do it alone. National Real Estate Management Group (NREMG) is an industry leader in helping buyers and sellers navigate the market. Contact us today and let’s set up a consultation. 

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