Category Archives: Buying Tips

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Why More Buyers Are Turning To Adjustable-Rate Mortgages Today

Affordability, Buying Tips, First-Time Buyers, For Buyers, Mortgage Rates, Mortgage/Lending, Real Estate, , , , ,

Why More Buyers Are Turning To Adjustable-Rate Mortgages Today Simplifying The Market

When mortgage rates climb, buying a home can start to feel like trying to hit a moving target. Every jump in rates makes monthly payments bigger, and that pushes a lot of buyers to look for another way in.

More and more of them are finding it in the adjustable-rate mortgage, or ARM.

The ARM Option  

Here’s how an ARM differs from a more traditional mortgage. With a regular fixed-rate mortgage, your rate stays the same for your whole loan. But with an ARM, your rate is locked for the first few years, then it can move up or down based on market conditions.

Some people don’t like that level of uncertainty – and that’s okay. But others are drawn to this option specifically because there’s usually a lower rate to start when you opt for an ARM. And in an affordability-strapped market, that’s going to gain popularity. 

Bankrate recently found that, in September, rates for ARM products were over a full percentage point lower than a regular fixed-rate loan. Depending on the ARM product, that can make a difference of $150-300 in the monthly payment on a median-priced home. 

And for some buyers, that’s enough to turn “not right now” into “let’s do this.” You can see it in the numbers. Data from the Mortgage Bankers Association (MBA) shows that, in October, roughly 1 in 10 people applying for a mortgage chose an ARM (see graph below):

a blue pie chart with text

If you think you may want to consider this yourself, here’s what you need to know about how it works.

The 5/1 ARM

An ARM is like a phone or cable plan that has an introductory deal for new customers. You start out at a lower price, and then it adjusts after a specified amount of time. A popular loan is the 5/1 ARM.

The “5” means your introductory rate is locked for the first five years, and the “1” means that the rate can change every year after that. The rate change is called the “reset.” And here’s the really important part.

When your rate resets, your mortgage payment could go up or down. The good news is that most ARMs have caps, which are limits on how much your rate can rise each year and over the life of the loan. But either way, you have to be ready. 

The Upsides and Potential Downsides

To see if this type of loan may be right for you, here are some things to think about and discuss with your loan officer:

a blue and white rectangular box with white text

Before you decide, ask your lender to work up the numbers and walk you through the different potential scenarios you could run into with an ARM. That way, you go in with your eyes open.

Be Ready for the Reset

And, if you do go with an adjustable-rate mortgage, just know that you’ll have choices when the reset time arrives. You could:

  • Do nothing and keep your loan in place if the new payment still fits your budget.

  • Refinance into a fixed-rate loan with a payment that never changes.

  • Refinance into another ARM with a new lower rate locked for a specified timeframe.

  • Sell your home.

  • Talk to the loan servicer about assistance or modification.

Remember, a refinance is a brand-new loan that you’ll have to qualify for – even if it’s on a home you already own. So, keep tabs on your credit and debt levels and ask your loan officer how major financial moves like job changes and major purchases will affect your mortgage readiness. It’s important to keep your credit and finances in “mortgage shape.”

Today’s ARMs Aren’t Like 2008

One more quick note. ARMs got a bad name after the financial crisis of 2008. Back then, there were some risky loans with small starting payments that later shot way up. Others let people borrow without proving how much money they earned.

But now, there are new laws to protect both borrowers and lenders. The biggest change is the Ability-to-Repay Rule, which says that before a lender makes a home loan, it has to check real paperwork (like pay stubs, W-2 forms, and tax returns) to make sure you can afford it. The lender also has to look at what your payment could be after the reset, not just the low starting payment. 

So, you don’t have to worry that today’s ARMs are the same as the ones we saw back during the crash.

Bottom Line

Today’s market has more options than many people realize. Finding the right one could be as simple as getting more information about tools like ARMs. A trusted lender can run the numbers with you, walk you through the what-ifs, and help you explore the possibilities.

Is an ARM a good option for you? Talk to a loan officer to find out.

Want a More Affordable Home? Don’t Overlook Condos.

Affordability, Buying Tips, First-Time Buyers, For Buyers, Real Estate, Rent vs. Buy, , , , ,

Want a More Affordable Home? Don’t Overlook Condos. Simplifying The Market

When you picture buying your first home, chances are you’re imagining a traditional single-family house with its own yard, maybe a garage, and little extra room to grow. But with affordability still tight, getting everything on that list right away may come with a higher price tag than you’re comfortable with right now.

So, if you’re running the numbers and buying a house like that feels like a stretch, there may be another way in. A condo.

Because in a lot of markets, condos come with a significantly lower price tag. And that could make them a smart way to get your foot in the door.

Condos Can Cost Less Than You Think

According to a recent study by Zillow: 

“Condos are the most commonly affordable home type in virtually every metro. At the starter level, the savings can be pretty significant. Nationally, starter condos average $197,468 — that’s about 6% less than the typical starter home.”

And depending on where you live, the difference can be much bigger. 

Zillow identified metro areas where typical starter condos are priced significantly below the estimated home price a median-income household could afford. Here are the top 10 according to that research (see chart below).

In Houston, the gap is at its widest. There, a typical starter condo was valued at about $85,600 – 72% below the price considered affordable based on the area’s median household income.

a blue and white chart with white text 

Of course, every market is different. But the bigger point is this: if you’ve only been searching for traditional single-family houses, you may be overlooking some of the more affordable options on the market.

And even if your city didn’t make this list, that’s okay. The trend holds true in many places across the country. Here’s why.

A Condo Could Give You a Different Way In

Part of the reason condos can cost less is pretty straightforward. They’re typically smaller. And less square footage can mean a lower purchase price.

So, if you can make do with a bit less space or you’re coming from a smaller apartment now, this can be a great way in. Plus, on the upside, you won’t have to buy a ton of furniture to fill out a bigger house. You can get a potentially lower price up front and spend less once you move in because you’ll need less new stuff to fill that empty space.

And more buyers are making that trade off on space to offset the current affordability challenges. Ali Wolf, Chief Economist for New Home Source, explains:

“In addition to favoring smaller floor plans, more consumers are showing a willingness to live in an attached home. This shift is not driven by a preference for shared walls, but by a pursuit of value.”

That’s really the heart of it. Looking at condos isn’t necessarily about wanting less. It’s about finding another way to make your move happen with the budget you have.

Don’t Rule Out an Option That Could Work

If you’ve been struggling to find a house you like at a price you can comfortably afford, talk to your agent about adding condos to your search.

You may find something in a neighborhood you thought was outside your budget. You could get access to amenities you wouldn’t otherwise have. And you may be able to become a homeowner sooner rather than waiting for the numbers on a single-family house to work.

While there are trade-offs like shared walls, less outdoor space, and an HOA fee to factor into your monthly budget, maybe that’s worth it if you finally get your own set of keys.

Plus, a lot of the times, a condo community comes with great amenities like pools, gyms, and the condo association handles at least some of the maintenance. Which is closer to what you’re used to from your apartment – it could make the transition to homeowner not just more affordable, but that much easier too.

Bottom Line

The first home you buy doesn’t have to be a single-family house. If affordability has been holding you back, talk to a local agent about expanding your search and see whether a condo could fit the price point you’re looking for.

The Biggest Credit Hurdle for Renters Who Want To Buy

Buying Tips, First-Time Buyers, Real Estate, Rent vs. Buy, , , , ,

The Biggest Credit Hurdle for Renters Who Want To Buy Simplifying The Market

What’s the biggest payment you make every month? If you’re a renter, it’s probably your rent. 

But did you know that you can pay your rent on time, every time, for years, and it may never show up in your credit history? It’s pretty frustrating, especially if you’d like to buy a home someday and you’re trying to build your credit.

The good thing is that’s changing right now. Here’s what you need to know and why it could open a door you thought was closed.

The Problem for Would-Be Buyers

You’re not the only one frustrated. According to Zillow, nearly a third of applicants (32.88%) get denied a mortgage due to insufficient credit history – not missed payments or too much debt. Just not enough credit history for a lender to say “yes.”

It’s the most common hurdle would-be buyers have. As Zillow explains:

“Nearly one-third of mortgage applicants are denied a loan because of insufficient credit history, making it the most common reason for a denial.”

a blue and grey pie chart

But there’s finally a way in now that how credit gets measured is changing.

The Good News: Credit Is Getting Broader

As Michael Sherman, General Manager and Senior VP at Zillow Rentals, explains:

“Affordability is the headline in housing right now, and access to financing is a very important part of the story. Credit history is a barrier standing in the way of too many potential buyers. Rent reporting is a direct way to address that.”

Here’s what Sherman is talking about. New credit models are emerging that take on-time rent and some utility payments into consideration to help renters get credit for the bills they already pay.

VantageScore is one company with a new credit model that has been approved for use by the Federal Housing Finance Agency (FHFA). And that roll out could have a big impact on renters like you.

A recent study by VantageScore found that nearly 4 million U.S. renters could finally become eligible for a mortgage if their on-time rent payments were counted as part of their credit history. Now, this isn’t a guarantee that it will suddenly count for every would-be buyer, but it does crack open the door.

Here’s the catch though, you still have to walk through it.

Counting Rental Payment History Is Not Automatic

There are more options available to build credit, but you have to be proactive. Your rent won’t necessarily count unless you make sure it does. And the sooner you take credit for your payments, the better.

Here’s how to get started based on a few tips from Experian, the Consumer Financial Protection Bureau (CFPB), and FICO:

  • Ask your landlord or property manager if your rent is being reported. If it’s not, opt in. 

  • If your landlord doesn’t offer rent reporting, there are services available. Be sure to check fees and which bureaus they provide your data to.

  • Check your credit reports for errors. Mistakes happen and fixing them is one of the quickest ways to strengthen your profile. The CFPB offers step-by-step instructions on how to fix errors on your report.

  • Follow basic, important credit rules. Pay your bills on time, keep your card balances low, and don’t apply for a bunch of new credit at once.

  • Don’t close any accounts – even if you have paid them off and don’t use them often.

  • Diversify your profile by getting a secured credit card or becoming an authorized user on someone else’s account to help you build history beyond rent.

These steps take a little time and effort, but it could be worth it if it starts building up your credit history. 

Just remember, not every lender uses the same scoring model and there are more changes on the horizon. So, the sooner you get credit for the work you do, the better. 

Even if you’re not sure when you might be ready to buy a home, talking to a lender is a good place to start. A professional loan officer will help you make a plan and help you figure out a timeline to get ready to officially apply and buy.

Bottom Line

The credit landscape is changing, but action is required on your part. You have to take credit for what you do. And the sooner you get started, the better.

Ready to see where you stand? A quick conversation with a loan officer costs you nothing and could show you you’re closer to owning a home than you think.

Why There are More Homes for Sale Right Now (and What It Means for You)

Buying Tips, For Buyers, For Sellers, Inventory, Real Estate, Selling Tips, , , , ,

Why There are More Homes for Sale Right Now (and What It Means for You) Simplifying The Market

Mortgage rates being back above 7% isn’t exactly the news most people wanted. But it’s changing the market in ways that matter whether you’re buying or selling.

The number of homes for sale is growing faster than it was this time last year. And interestingly, the main reason isn’t a flood of new listings. It’s because homes aren’t selling as quickly.

Here’s why – and what that means if you’re thinking about buying or selling.

Inventory Growth Is Picking Up Steam

According to HousingWire Data, after inventory growth slowed down for most of the past year, it’s accelerated again in recent weeks. You can see that in the graph below. Just look at the blue line:

a graph of growth and growth

And what’s behind this shift might surprise you.

When rates rise, some buyers hit pause. That means fewer homes sell each week. And as those unsold homes stay on the market alongside new listings, the number available starts to grow (see the blue line in the graph below).

Here’s another way to look at it to make it even more obvious. The graph below shows the relationship between rates and inventory. Again, this year is the blue line. Last year? That’s the green.

With rates inching up this year, you can see inventory has grown by about 25k. But when rates went down this time last year, buyers jumped back in, and inventory actually dropped by about 9k.

a graph of growth and growth of a mortgage

Logan Mohtashami, Lead Analyst at HousingWire, explains how that’s flipped from 2025 to 2026:

“With mortgage rates over 7%, demand tends to soften and inventory rises . . .”

Homes Are Spending More Time on the Market

Here’s another metric that shows the impact rates are having: time on market. Data from Realtor.com shows the typical home spent 61 days on the market this September. Back in September 2021, it was just 41 days (see graph below):

a graph of sales growth

Here’s what that tells us. In 2021, when rates were low, more buyers were active, and homes sold fast. But now that rates are a bit higher, not as many buyers are interested, so it takes a bit longer to close a deal.

How To Make This Market Work for You

So, what does all of this mean for your plans? That depends on which side of the move you’re on:

If you’re buying, more homes for sale means more choices and less pressure to rush. And more room to negotiate too. A house that’s been sitting for a while could have a seller who’s more willing to talk – not just about price, but repairs, closing costs, or even helping buy down your mortgage rate.

That doesn’t mean every seller will play ball. But compared to the frenzy of a few years ago, buyers have more leverage now.

If you’re selling, the right strategy can make all the difference. Buyers have more homes to choose from, so making yours stand out is especially important. That starts with pricing it right from day one, making a great first impression, and working with your agent to highlight what makes your house worth choosing. Buyers are still buying and homes are still selling. The key is making sure yours is positioned to attract the right buyer.

The market hasn’t stopped. It’s just moving at a different pace. And whether you’re buying or selling, your strategy needs to move with it.

Bottom Line

In many places right now, inventory is growing and homes are taking a bit longer to sell. And that’s information that should shape the strategy you use going in.

Whether you’re buying or selling, connect with a local real estate agent to look at how long homes are taking to sell in your neighborhood, so your offer, or your price, fits today’s market.

Myth vs. Reality: Does the Fed Control Mortgage Rates?

Affordability, Agent Value, Buying Tips, Economy, For Buyers, For Sellers, Mortgage Rates, Real Estate, Selling Tips, , , , ,

Myth vs. Reality: Does the Fed Control Mortgage Rates? Simplifying The Market

You’ve probably heard the Federal Reserve (the Fed) is raising rates again. And if you’re planning to buy or sell a house, you may be wondering what that means for you.

With all the headlines, it’s easy to think the Fed sets mortgage rates. That’s actually a common myth. But the Fed’s decisions can still have an impact on them.

So, where does that leave you? The next few months could get a little bumpy. But the Fed is playing the long game. And with the right plan, you can still make a move that works. Let’s break it down.

Why the Fed Is Raising Rates

It all comes back to inflation. With prices rising fast, everything is getting more expensive – and that leaves buyers with less spending power and makes homes cost more to build.

So, the Fed raises its key short-term rate (the Federal Funds Rate) to slow down inflation. And that’s where a lot of people get tripped up.

  • MYTH: The Fed controls mortgage rates.

  • REALITY: The Fed has an impact on mortgage rates, but it’s only one piece of the puzzle.

As NerdWallet explains:

“The Federal Reserve influences mortgage rates, but doesn’t set them. . . Mortgage rates are influenced by many elements, including the inflation rate, the pace of job creation, and whether the economy is growing or shrinking. The Federal Reserve’s monetary policy is a factor, too . . .”

Here’s the simplest way to explain how it all fits together. Mortgage rates tend to follow something called the 10-year treasury yield. That’s the return investors get for lending money to the government for 10 years. And that yield moves up and down based on what investors expect from inflation and the economy.

Right now, one of the biggest things moving that yield is the conflict in Iran. It’s pushed oil prices higher, which has investors worried about inflation. That’s why any news about the conflict can move mortgage rates. If there’s resolution in Iran, that could take some pressure off inflation and mortgage rates. But the timing is hard to predict.

What the Fed does can move that yield, too. When they hike the Federal Funds Rate to fight inflation, investors pay attention. That can push the 10-year yield up, and mortgage rates usually follow. But once inflation cools, the yield has room to come back down, and mortgage rates can, too. That gives buyers some of their purchasing power back (see graphic below):

a diagram of a federal funds rate

Think of it as a little pain today to set up some relief down the road. But how long could that short-term pain last? A lot depends on what the Fed does next.

There’s a Strong Possibility the Fed Will Hike Again This Year

According to CME FedWatch, there’s over an 80% chance the Fed hikes their federal funds rate at least once more before the end of 2026 (see graph below):

a graph of hikers with blue squares

Remember, the Fed doesn’t set mortgage rates. But another hike will likely keep upward pressure on them in the short term. So, should you wait it out? Sam Williamson, Senior Economist at First American, says this:

“Over time, firmer Fed action could help steady the bond market and open the door to lower mortgage rates, but only if investors become more confident that inflation is coming under control.“

And there are some early signs that’s starting to happen. Inflation cooled faster than experts expected in August:

  • PCE inflation dropped to 3.4%, down from 3.7% in July.

  • Core PCE (the Fed’s preferred measure which leaves out food and energy prices) fell to 3%, down from 3.3%.

That’s a step in the right direction, and it’s part of why the odds of a hike at the Fed’s October meeting have come down recently. But inflation’s still above the Fed’s 2% target, and it’s been that way for about 5 years. So, lower rates could still take a while. Your best bet is a plan that works at today’s rates.

How To Make Your Move Work Right Now

While this rate hike cycle isn’t the headline you want to see, it doesn’t mean you have to wait. There are still ways to move, even now.

  • If you’re buying: Get pre-approved so you know your real budget. Ask your lender about your options to get the best rate possible. And once you’re under contract, lock your rate so a jump before closing doesn’t raise your payment.

  • If you’re selling: Decide what matters most to you – a quick sale or top dollar. Each one can call for a different plan. Price for today’s buyers, whose budgets are smaller with higher rates. And think about offering a rate buydown or other concession. They can do more for a buyer’s budget than a price cut.

Bottom Line

The Fed doesn’t set mortgage rates, but its hikes can keep them higher for a while. The goal is to bring inflation, and eventually rates, down over time. With more hikes likely this year, waiting may not pay off. So, connect with a local real estate agent to map out a plan that works at today’s rates.

Two Moves That Can Get You Into Your First Home Sooner

Affordability, Buying Tips, First-Time Buyers, For Buyers, Real Estate, Rent vs. Buy, , , , ,

Two Moves That Can Get You Into Your First Home Sooner Simplifying The Market

For a lot of first-time buyers, owning a home can feel perpetually a few years out of reach. Saving for a down payment takes time, and each year you spend renting can make owning feel further off.

But buying your first home doesn’t have to happen to feel like a far away goal. Two choices you control can bring your first home years closer, even with affordability as tight as it is right now.

How Long Buying Really Takes

First, one quick definition. “Breaking even” is the point where owning has cost you about the same as renting would have over the same period. And after that point, owning starts to cost less than renting. Kara Ng, Senior Economist at Zillow, puts it this way:

“Buyers should think about not just when they can afford to buy, but how long they’d need to stay before owning makes more financial sense than renting.“

So how long does reaching that point usually take? And what are the shortcuts? Let’s do the math.

According to Zillow, it usually takes about 8.5 years to save for a 20% down payment, then roughly 6.2 more years before owning costs the same as renting. Together, that’s just under 15 years. But that math relies on two assumptions: that you’re buying a mid-priced home, and that you’re putting 20% down. 

Change either one and your timeline gets shorter. Change both and it can shrink fast. It also varies widely by market, since local prices and rents are different depending on where you live. 

A Starter Home Can Get You There Twice as Fast

A starter home usually means a home in the lower third of local prices. They’re often condos, townhomes, or single-family homes a little smaller or older than others in the area. 

Choosing one over a mid-priced home can cut your wait down by a lot. And while that might sound obvious, you may not realize just how much it shortens your timeline. Because if you’re buying a more affordable home, you don’t have to save up as much or as long.

Zillow found that nationwide, a starter home takes half the time – about 7.2 years – to save for and come out ahead on, compared with renting (see graph below):

a graph of a number of squares

That works out to about 4.6 years to save and 2.6 years to break even. It won’t erase every affordability challenge, but it can take years off the wait. And if you’ve already been saving for a while, it could get you closer to making it a reality.

You Usually Don’t Need To Put 20% Down

You, like many first-time homebuyers, might assume you need a 20% down payment to even consider buying. But a lot of the time, you don’t. 

Most first-time buyers don’t put down anywhere near that. The National Association of Realtors shows the median down payment for first-time buyers is 10% (see graph below):

a graph of a sales report

And the minimums go lower still. Some buyers put down as little as 3% on a conventional loan or 3.5% on an FHA loan, and eligible veterans or buyers in certain rural areas can put down nothing at all.

There’s help with the upfront costs of buying, too. Down Payment Resource counts 2,746 assistance programs nationwide, and some are even stackable:

“Some homebuyers can layer multiple sources of assistance to reduce their upfront costs. Layering means combining more than one eligible source of funding as part of your home purchase.”

Put those together – a lower price point, a smaller down payment, and help covering it – and the years you thought you needed start to come down.

Bottom Line

Your first home may not be as far off as it feels. When the numbers make sense for you, buying a starter home and putting down less than 20% can get you there years sooner. 

Want to see which starter homes in your area could fit your budget? A local real estate agent can show you.

Hoping for (or Dreading) a Housing Crash? The Experts Just Weighed In.

Buying Tips, Equity, First-Time Buyers, For Buyers, Forecasts, Home Prices, Real Estate, , , , ,

Hoping for (or Dreading) a Housing Crash? The Experts Just Weighed In. Simplifying The Market

Half the buyers out there are scared home prices are about to crash. The other half are hoping they will.

A recent survey from Clever found 58% of Gen Z buyers are actually rooting for a crash, just so homeownership feels within reach.

So, what do the forecasts actually say?

Every quarter, Fannie Mae surveys more than 100 housing experts on where prices are headed. The newest results are in. And spoiler alert: they’re not calling for a crash – not even the pessimists.

What the Newest Numbers Actually Say

The panel’s latest forecast has prices climbing every single year through at least 2030.

The panel’s average forecast is that prices will rise by 14.7% in the next 5 years. And here’s where it gets really interesting. If you split these experts into optimists and pessimists, even the pessimists still expect prices to increase about 6.6% by the end of 2030 (see graph below):

a graph showing the price of a home

The takeaway? If you’ve been waiting for prices to fall, you may be waiting a while.

One thing to keep in mind though – these are national numbers. Prices in your area could run a little hotter or a little cooler than this, so it helps to know what’s happening locally, too. But the big picture is prices aren’t crashing. Historically prices usually rise.

How This Quarter Compares to the Past

Here’s something you probably don’t realize. This survey runs 4 times every year, so you can track the panel’s mood over time.

A year ago, the panel expected home prices to grow 2.1% this year. Now they’re forecasting 2.5%. That means the near-term outlook actually got more optimistic. But that’s only part of the story. The years after that shifted, too (see graph below):

a graph of growth in a graph

Zoom out to 2027 through 2029 and the mood has cooled a bit. Each of those years is now expected to see a little less growth than the panel thought a year ago. That’s likely a reflection of where we are right now with everything that’s impacting the housing market.

But again, the overall takeaway here is every bar shows an increase in prices – the size of that increase has just moderated due to some of the factors at play.

A slower climb isn’t a bad thing, though. It’s a sign the market is settling into a more normal pace after a few wild years.

A little more growth here, a little less growth there. What hasn’t budged once is the idea that home prices will keep growing.

What It Means for Your Next Move

Now, percentages are great, but you probably care more about the actual dollars and cents of your move, so let’s graph that out, too.

Run the numbers on a $400,000 home bought in January, and the panel’s latest forecast puts you up about $58,000 in equity in 5 years just from price growth (see graph below):

a graph of growth in a number of green squares

That’s real wealth you could be building while others sit on the sidelines, waiting for a crash the experts don’t see coming. And with prices expected to keep rising, waiting could mean paying more for the same home later.

Bottom Line

Whether you’re bracing for a crash or hoping for one, the verdict is the same – prices are still expected to rise, not fall. Talk with a local real estate agent about what that means for your market and your plans.

The Mortgage Rate You See Online Isn’t Necessarily the One You’d Get.

Affordability, Buying Tips, First-Time Buyers, For Buyers, Mortgage Rates, Real Estate, , , , ,

The Mortgage Rate You See Online Isn’t Necessarily the One You’d Get. Simplifying The Market

You may have seen the headlines saying mortgage rates have climbed to the highest point since January 2025. And if that’s left you reluctant to buy a home, here’s what you need to remember… 

That’s not necessarily the number you’d get. 

It’s a common misconception that the rate you see in the headlines is the same one you’d get when you buy. The truth is, mortgage rates shift often, and the rate you actually end up with can vary a lot from what you may see or hear about. 

What Determines Your Real Rate? 

Advertised rates and “real rates” aren’t always the same. That’s because real rates are based on your specific situation, which includes your overall finances and goals. The rates you see in the headlines can’t possibly reflect that. 

That’s why only a lender can tell you what your real rate will be. To figure out your unique number, they’ll look at:

  • Your credit score: Your credit score includes your payment history (if you’ve made late payments – and how often), credit utilization (are your accounts maxed out, or do you have available credit?), and the length of your credit history (how long have your accounts been open?). For example, someone with an exceptional credit score may qualify for a better rate.

  • Your debt-to-income ratio (DTI): This is calculated by dividing your monthly debt payments by your monthly income before taxes to come up with a percentage. The higher your DTI, the higher your rate could be.

  • The down payment size and Loan-to-Value (LTV): Your down payment is the percentage of the home’s price you will put down. The LTV is the percentage of a home’s sales price that equals your mortgage. 

  • The type and term of loan program options: Your loan officer will walk you through different loan options based on what you qualify for. Mortgage rates can vary between different loan products and programs. 

Even after you find a home you love, other things can have an impact too. For example:

  • A mortgage rate buydown: This helps you get a lower mortgage rate, and by extension, a lower monthly payment, by paying an upfront cost. Sometimes a seller, builder, or another party may even offer to cover that cost themselves as an incentive for you to buy.

  • Seller concessions: Sellers are allowed to pay buyer closing costs according to most loan program guidelines. Seller-paid closing costs can add up to thousands of dollars, which can free up some cash for you to increase your down payment, pay down debt, or make other financial adjustments to try to get a better rate. 

There’s a lot that can ultimately have an impact on your actual rate. 

Your First Step? Getting Pre-Approved.

If you want to know if your number could be higher or lower than the headlines on social, you need to talk to an expert. A simple conversation with a loan officer can help you determine when you’ll be ready to buy, how much you can borrow, and of course, what your real rate will be. 

Your lender may recommend a pre-qualification and pre-approval:

  • Pre-qualification is a general estimate of what you might be able to borrow based on self-reported information. 

  • On the flip side, pre-approval is actually a conditional commitment from a lender based on verified information. 

Just know that, of the two, the pre-approval process gives you a more accurate picture of your options than pre-qualification. Bankrate gives a quick comparison so you can see why:

a blue and white chart with white text

How To Get Ready for the Conversation

Ask your lender what documents you’ll need to gather for that conversation. And keep these questions in your pocket too. They’re good things to go over when you talk: 

  • What will I gain or lose by waiting to buy a home for 3, 6, or 12 months? 

  • Will I get any tax advantages by buying a home – and what are they? 

  • What’s the benefit of buying a home and starting to build equity now versus waiting? And how does that impact my finances in the long run?

  • How will rate changes in either direction affect me?

Once you find out your rate, maybe you can buy now. Or maybe you still need to wait. But at least you’d know your options and can make an informed decision.  

Bottom Line

Headlines and social media make today’s rates sound high. But you have to remember, the rate you’re seeing online and your actual rate could be different. The only way to know what your rate could be is to talk to a trusted lender. 

With the right help, you can find out what your real rate is – and where it can take you.

Why So Many Sellers Are Cutting Their Price Right Now

Affordability, Agent Value, Buying Tips, For Buyers, For Sellers, Home Prices, Price It Right/Overpricing, Real Estate, Selling Tips, , , , ,

Why So Many Sellers Are Cutting Their Price Right Now Simplifying The Market

Price cuts are turning up everywhere right now, and they read very differently depending on which side of the deal you’re on.

Sellers tend to worry a cut means walking away with less than they hoped. Sometimes that’s true, but more often it just means the market moved faster than the listing did.

Buyers, for their part, often assume a cut means something’s wrong with the house. Most of the time, that’s not it.

This is what’s actually driving all those price cuts, and why it matters no matter which side of the deal you’re on.

42% of Homes for Sale Are Now Carrying a Price Cut

According to HousingWire Data, the share of sellers cutting their asking price has climbed every month for 7 straight months (see chart below):

a graph showing the growth of a straight month 

Today, more than 4 in 10 active listings have had at least 1 price cut, and the typical seller is cutting about $17,560 off their original number. 

Here’s why that’s happening. With rates still elevated and more homes to choose from, buyers can afford to wait for the right number. So, sellers who don’t start there often end up adjusting anyway.

What does that mean for you?

  • If you’re selling, this isn’t a red flag. But it is a sign that pricing it right from day 1 is your best bet. Just know that the market’s been shifting fast enough this year that sometimes even a well-priced house can fall behind within a matter of weeks. If that happens to you, dropping your price to catch up to where pricing actually stands today tends to bring in more buyers and helps you sell closer to true market value.

  • If you’re buying, it’s easy to assume a price cut means something’s wrong with the house. But with cuts happening on more than 4 in 10 homes right now, the reality is sellers are just catching up to where the market already is. And with affordability still tight, that’s exactly the kind of opening you need to get a better deal.

Why Sellers Are Adjusting Faster than Before

HousingWire Data also shows list prices are trending down nationally. That’s often a sign sellers are pricing more realistically from the start instead of listing high and getting stuck cutting later. List prices have fallen about $26,000 from last year’s peak.

Some of that decline is seasonal, since list prices typically soften each winter before rebounding in the spring. So, expect asking prices to keep drifting a little lower before turning back around (see chart below):

a graph of a number of people 

Jake Krimmel, Senior Economist at Realtor.com, explains: 

“That is good news for buyers, who are seeing lower asking prices and more room to negotiate, but it is also good news for sellers: Pricing to today’s demand is helping homes move and keeping more transactions alive in a high-rate environment.”

Translation – with rates still elevated, buyers can only stretch so far. Sellers who meet them where they are instead of holding out for unrealistic prices are the ones actually getting to closing. And doing that up front is always better than chasing the market later.

Buyers, You’ve Got Room To Negotiate Again

At the same time, Redfin data shows sellers now outnumber buyers by about 58%, the widest gap on record (see chart below):

a graph of sales 

That changes the power dynamics of the market – and impacts how homeowners should price their house. Nationally, about 7 in 10 markets now favor buyers or are trending that way.

  • For sellers, that means standing out matters as much as pricing. With more homes to choose from, buyers are comparing you directly against the competition. So, a little flexibility, like covering closing costs or being open on timing, can be what gets your house picked over another.

  • For buyers, it means more room to ask for a lower price, help with closing costs, repairs after inspection, or some combination of all 3. That’s especially true for homes that have already sat for weeks, where sellers are often the most willing to talk.

Bottom Line

Price cuts are a normal part of today’s housing market, and both buyers and sellers can use them to their advantage. Connect with a local real estate agent to look at what’s actually happening with prices in your neighborhood, so you know exactly where you stand before you list or make an offer.

There Are 4 Types of Housing Markets Right Now. Which 1 Are You In?

Agent Value, Buying Tips, For Buyers, For Sellers, Mortgage Rates, New Construction, Real Estate, Selling Tips, , , , ,

There Are 4 Types of Housing Markets Right Now. Which 1 Are You In? Simplifying The Market

Today’s housing market splits into four distinct types. You’ve got cash buyers, buyers financing a purchase, owners who feel locked into a low rate, and builders with homes to sell. Which type you’re in changes how you should buy or sell. Ryan Serhant, CEO of SERHANT agrees:

“There is no longer a housing market . . . There are four Americas.”

Here’s what each looks like, and what it means for you.

Cash Buyers: 1 in 4 Buyers Are Paying with Cash

If you already own a home, you may be able to buy your next place in cash thanks to your equity. In fact, 26% of existing home sales this summer were all-cash, according to the National Association of Realtors (NAR). That’s roughly 1 in 4 buyers skipping a home loan entirely.

Data from Realtor.com shows most are at the very top and very bottom of the market by price point (see graph below):

a graph of green bars

For Buyers: If you’re able to buy in cash too, having no financing contingency means your offer is going to look really appealing to sellers. You may get a faster close and more room to negotiate.

For Sellers: A cash offer can mean less risk of the deal falling through, but that certainty sometimes comes with a lower number attached. Compare the whole picture before deciding it’s automatically your best offer.

Buyers Using Financing: They’re Not Getting Help from Rates, But They Are from Sellers

If you’re looking to take out a mortgage, you should know mortgage rates aren’t likely to come down anytime soon. Data from Fannie Mae shows nearly half of experts actually raised their long-term rate forecast this year (see graphs below):

a graph of growth and growth

That’s tough for homebuyers relying on a mortgage, especially first-time buyers. But it’s not all bad news.

While buyers may not be getting the lower rates they want, at least there’s help to be had if you ask sellers for what you really need. Redfin data shows almost half of May sales included a concession like a rate buydown or closing-cost credit from the homeowner.

For Buyers: Stop waiting on rates to drop. Negotiate the concession instead. If the payment works today, that’s your signal.

For Sellers: Expect to negotiate. Build a concession into your pricing strategy from the start could be the thing that gets a deal done.

Rate-Locked Homeowners: Most Are Sitting on a Rate Below 5%

If you own a home already, you might not want to move and take on a higher rate than the one you’ve got. That’s the case for a lot of people. About 2 in 3 homeowners have a mortgage rate under 5%, according to Federal Housing Finance Agency (FHFA) data (see graph below).

When a homeowner has a rate that low, it’s harder for them to want to move and leave behind that ultra-low rate. Because, they’d likely have to take on a higher one on their next home. Hence “rate locked” – they feel locked in.

a graph of a graph with text

And, according to Fannie Mae data, most experts think that lock-in will stick around another 3-5 years. That means this will continue to be a factor in how many homes come up for sale.

For Buyers: Fewer homeowners are listing, but the ones who do usually have a real reason to move. They’re often more flexible, motivated sellers.

For Sellers: Run the math on what your equity actually buys before ruling out a move. Got an FHA or VA loan? Ask about making it assumable. It’s rare, but it’s a real selling point.

Homebuilders: They’re Negotiating More Than You Think

If you’re looking at new construction, this might be your moment. According to the latest Census data, builders have more unsold new homes sitting around than usual, enough that it would take nearly 10 months to sell them all at the current pace (well above the normal 4-6 months pace). That’s pushing builders toward price cuts and rate buydowns.

For Buyers: That’s where the deals are right now. Just be sure to use your own agent and compare the whole incentive package, not only the price tag.

For Sellers: Lead with what a builder can’t offer – mature landscaping, an established neighborhood, and a house that’s ready today, not in 8 months. That can help your house seem like a better optiona

Bottom Line

Four different housing markets are running at once: cash buyers, financed buyers, locked-in owners, and builders. Each one plays by its own rules, and the right move for one is exactly the wrong move for another.

Connect with a local real estate agent to figure out which one you’re actually in and build your next move from there.