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You have options to safeguard yourself from fluctuating rates.
The Federal Reserve has increased rates multiple times this year so far and will continue to do so throughout 2022. That means if you’re in the process of buying a home, the rate your lender quotes could increase sometime in the future. So what happens if interest rates increase after you’ve already gone under contract? Is there any way to protect yourself?
First of all, when we’re writing an offer with a financing contingency, we typically determine whether your rate is fixed or variable and what terms would allow you to cancel the contract. In a rising market like this, you should get a mortgage rate lock as soon as possible in the process to prevent your rate from increasing further. Some lenders have products that let you lock before your offer gets accepted, but you may have to pay a higher interest rate to do this.
Second, ask your lender if they provide float-down options, which prevent your rate from rising but allow it to lower if market rates begin to fall again. Be advised, though, that float-down options typically come with an extra cost in exchange for a lower rate.
If you have any questions or would like to learn more about mortgage rate locks and float-down options, don’t hesitate to give me a call or send an email. I’d be happy to help you.
Are you planning to buy a condo? Here’s what you need to know.
I’ve recently been working with a few clients who want to purchase condos and then rent them out as a part of their real estate investment. It’s a great way to generate wealth but condos are not exactly like houses. If you want to pursue this route, there are a few key differences between the two you’ll need to know.
You can listen to my full explanation in the video above or skip to each topic using the timestamps provided:
0:00 — Introduction
0:34 — Condos are governed by more rules
0:49 — Many condo associations have rental restrictions
1:35 — Renting out your condo can drive down your property’s sales price
1:50 — The condo association typically takes care of the maintenance of the condo building
2:31 — There is typically a monthly condo fee you’ll have to pay
2:56 — What you own when you buy a condo
3:42 — Learn the scope of your ownership and responsibilities
3:57 — A Wisconsin law when buying a condo
5:52 — Wrapping up
If you need more details about this topic or have any real estate concerns, don’t hesitate to call or email me. I’ll be happy to help!
What can you do if a home doesn’t appraise in this crazy-hot market?
In the Madison market, inventory is incredibly low. As a result, competition for homes is fierce, and prices continue to rise. When you want to buy a home, the bank or your lender order an appraisal to make sure the house’s true value supports the amount you’re paying for it. This usually isn’t an issue; however, when prices are rising so quickly, homes often don’t reach the agreed-upon price during appraisal. What can you do in this situation to make sure the deal doesn’t fall through?
In our current market, many buyers deal with this situation by skipping the appraisal altogether. They do this by either offering all cash or waiving their appraisal contingency. Unfortunately, this isn’t an option for everyone.
If you can’t waive your appraisal contingency, your real estate agent can help you dispute a low appraisal. The appraised value is supposed to be what the true market value is. If your agent can make a convincing case that the home is worth what you’re paying for it, you can successfully win your dispute.
Often, we’ve found that multiple-offer situations are a good piece of evidence to show an appraiser. Home values are increasing rapidly, so the more recent the data, the better. If you can prove that others were willing to pay a similar or identical price for the property, you could win your dispute.
This is a complicated topic, so if you’d like to talk about it, please call or email us. We are always willing to help!
Interest rates are shooting up; how does that affect buyers’ affordability?
Interest rates have increased recently; they’ve crested 5% on a 30-year fixed home loan. They’re still low compared to historical averages, but with what’s happening with the economy and inflation, the cost of everything is rising. Escalating interest rates will affect buyers’ affordability.
A 1% higher rate increases your monthly payment by about 10%. For example, a 30-year fixed loan with a 4% interest rate might cost $2,000 per month, but when the rate climbs 1%, that monthly payment will be $2,200. That extra 10% you’ll pay monthly is simply going to the bank; it’s not giving you anything more than you had.
“Escalating interest rates will affect buyers’ affordability.”
The other day, interest rates at two of the larger institutions in our Madison market were 5% and 5.125%, which is shocking when we recently were in the 3.5% range. However, let’s look at it a different way; if you have your money in other investments or IRAs, your interest rates are much higher than that. Also, inflation is currently at a 40-year high—much higher than 5.1%. So though our rates are trending upward, they aren’t appallingly high by any means.
Many experts agree that we’ll continue to see rates tick up until buyers get to the point where they refuse to pay. There are programs available to help you in the short term; adjustable-rate mortgages, for example.
I hope this answered a few of your questions, but if it brought up additional ones, you can always reach out directly via phone or email. We would love to help you.
Here are a few of the many ways to sell your home based on your situation.
It’s no secret that this is a tough market. People looking to buy and sell a home at the same time are in a tricky spot. Sure, you can sell your old house easily, but how can you buy a new one without going homeless?
In a balanced market, it isn’t too difficult to line up your home sale with your purchase, but we are far from a balanced market. There are many ways to accomplish this goal, but I can only share a couple in this short video. Please reach out to me to go through your specific situation.
In a hot seller’s market like ours, you have two main options:
If you have questions about which option is right for you, please give me a call or shoot me an email. I’d love to talk with you about your options and your specific circumstances.
These are the ten commandments of applying for a house loan.
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There are ten specific things that you shouldn’t do from the time when you’re applying for a home loan until after you close. We discuss these with all of our buyers during our consultation, and it’s very relevant since people are refinancing because of low mortgage rates. Here’s the list:
1. Don’t change jobs, become self-employed, or quit your job. Discuss any sort of job move with your loan officer. They may say it’s okay, but as a rule, do not change jobs.
2. Don’t buy or lease any type of vehicle.
3. Don’t max out your credit cards or close any accounts.
4. Don’t spend money that you have set aside for closing.
5. Don’t omit any debts and liabilities from your loan application. Once they do your final poll, those will show up and could cause some problems.
6. Don’t buy furniture or put it on layaway.
7. Don’t do anything to cause any additional inquiries into your credit.
8. Don’t make any large deposits. Make sure to check with your loan officer before doing this.
9. Don’t change banks or bank accounts.
10. Don’t co-sign a loan for anyone. This will create additional liability for you on your credit.
If you have any questions or if you’re looking to purchase a home, we’d love to help you. Don’t hesitate to reach out to us by phone or email.
The costs associated with homeownership you may not have considered.
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There are more costs associated with owning a home than the monthly payment. Just when buying the home, you’ll have to pay for closing costs, the down payment, earnest money, title insurance, inspections, appraisals, the recording of the deed, etc. You need your real estate agent to lay out those costs for you ahead of time. Then after you own the house, there are five main things you should remember to budget for:
1. Furniture. Many people buy a house and then realize they need to buy furniture, which can cost thousands of dollars depending on what you’re getting.
2. Ongoing maintenance. Things are going to go wrong with your new house, and you no longer have a landlord to repair it. It’s a good idea to set a little money aside each month so you have it when things need to be fixed.
3. Home warranty. Consider purchasing a home warranty or having the seller purchase it for you (though having the seller pay isn’t as common in this strong seller’s market). For about $450 to $550, you can cover some of the major things in your house, at least for your first year of ownership.
Things are going to go wrong with your new house.
4. Taxes and insurance. Your lender will require you to insure the property, and if you don’t pay your taxes, the government will take your house away from you at some point.
5. Utility bills. These include things such as heat, electricity, water, sewer, etc. You can search an address online to see what a property’s high, low, and average bills have been for the past year. To search locally, visit the Madison Gas and Electric or Alliant Energy websites.
If you have questions about these hidden costs or any other real estate matter, don’t hesitate to give us a call or send an email. If you’re a first-time buyer, we’d love to help educate you about the entire process.
Here’s why you should have your dryer vents cleaned at least once a year.
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If you haven’t already this year, make sure you get your dryer vents cleaned out. We just did ours, and it looked like we were trying to make a quilt. One of the main causes of home fires comes from dryer vent lint.
Cleaning out your lint trap between loads isn’t enough. Having your vents cleaned out with compressed air once a year isn’t too expensive, and it can save you from even bigger expenses and a potential fire. Reach out to us if you need a good company to take care of this and we’ll get you connected.
If you have any questions for me about your home or anything related to real estate, don’t hesitate to reach out via phone or email. I look forward to hearing from you soon.
Here are some tips for navigating this seller’s market as a buyer.
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Buying a home in a seller’s market is always a tricky process. With low inventory and high demand, sellers have the upper hand and they know it. Right now in Madison, there are just 315 listed properties, of which only 132 are available for purchase; the others have already accepted offers. That equates to less than a half-month of inventory. Thankfully, there are a few aspects of this crazy 2021 market that will do homebuyers a world of good to know.
For starters, interest rates remain at all-time lows. The average rate for a 30-year fixed mortgage dropped to 2.79% during the week of January 11. As of the morning of this recording, we had a pre-approval come through at a mind-blowing 2.6% for a 30-year fixed mortgage with 3% down. What’s even better news is that all the major industry players predict these rates will stay around the low 3s throughout 2021.
Now, given that these low rates are fueling such prolific demand, home prices will likely continue to rise, albeit at a slower pace. Our research shows that prices should increase by a rate somewhere between 4% to 5%. The Mortgage Bankers Association projected a modest 2.4% jump in home prices, and Freddie Mac didn’t get much bolder with its projection of 2.6%.
All the major industry players predict that interest rates will stay around the low 3s throughout 2021.
With the market moving as fast as it is today, it’s so important to have all your financial ducks in a row. That means getting pre-approved and being ready to throw out an offer when the right home hits the market. You’ll likely find yourself in a bidding war, so here’s some advice:
Don’t just focus on price alone. The other terms of your offer can be just as important. For example, you may want to waive certain contingencies or add an escalation clause that will automatically increase your offer price if other higher offers come in. This shows the seller you’re serious about buying their house without forcing your hand financially.
You could also consider doing an inspection but set a limit to the number of repairs that you’ll be able to request. In certain circumstances, we’ve also found that writing a personalized cover letter to the seller can help a buyer’s chances. If price and terms are all equal, it just might be the thing that sets yours apart from other offers.
So, if a home purchase or sale is a major part of your 2021 plans, it’s time to start the process. You can get a jump on the spring market by taking a look at all the homes and condos that are available for sale in Madison and Dane County right now; just head to madisonneighborhoods.com and danecountymarket.com. As always, if you have questions about this or any other real estate topic, don’t hesitate to reach out to us via phone or email. We’d love the opportunity to have a chat with you soon.
These tips may have worked in the past, but things in our market have changed. Here’s the outdated advice you should avoid.
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If you’re in the market to buy a home, you’ve probably heard all sorts of advice from friends and relatives about what you should be doing. However, some of the tips you’re being given don’t exactly work anymore in our market, so today we’ll be going over the outdated home buying advice you’ll want to ignore.
“You should wait until prices decrease.” We’ve been in a seller’s market, meaning there are too many buyers and too few homes. As a result, prices have gone up as people compete for listings. So while the advice makes sense, my argument is this: Rent is also high. In almost all cases, you’ll find that renting is more expensive than paying a mortgage, and paying rent means you’re not building any equity. On top of this, interest rates are still historically low. If you miss out on these rates by waiting, you’ll likely be paying more later on.
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Renting is more expensive than paying a mortgage, and paying rent means you’re not building any equity.
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“You should make an offer with room to negotiate.” For most transactions, this doesn’t work well anymore. Homes are selling close to or even above list price, and with multiple-offer situations occurring on many properties, you’re unlikely to hear a response if you don’t make a great or decent offer initially. Look at sold comparable properties with your agent and see what the market value is. If you keep hearing nothing back after submitting your offers, you may run into buyer fatigue and resign yourself to renting for the foreseeable future.
“You should wait for spring.” The time before the spring market is the best time to be out there. By waiting until spring, you’ll be competing with more people than you would be now. So if you can find the right property now, take the opportunity and avoid springtime competition.
“You should make an offer right away.” Yes, it’s important to get an offer in quickly, but you still need to have a comparable market analysis to ensure that what you’re doing is a good idea. It protects you in case it doesn’t appraise or big problems turn up during an inspection.
If you have any questions or would like to learn more, feel free to reach out to us for some answers. We look forward to hearing from you soon.
