NAVIGATING MORTGAGE INTEREST RATES

By Jen Shedrick | e-Mortgage Consultant | Prosperity Home Mortgage LLC

Navigating higher interest rates can be challenging, but it's essential to adapt your strategies, whether you are a buyer, seller or a real estate agent. Interest rates can impact both buyers and sellers, so it's crucial to understand the implications and adjust accordingly. Your realtor® and lender play different but complementary roles. The realtor helps you find and negotiate for the right property, while the lender manages the financial aspects of the purchase. It is important for your real estate professional and lender to have a relationship so they can offer strategies, keep you informed, and work together as a team to get you to the closing table. Below are some key strategies and terms you may come across while navigating a dynamic real estate market.

Pre-Approval letters are key in a competitive market. A pre-approval letter is obtained by filling out a loan application and providing documentation to support the application. Along with the pre-approval letter the buyer will get a loan quote of lender fees, closing costs, escrow and cash to close amount. This vetting protects buyers from pursuing unaffordable properties and identifies potential transaction pitfalls before going under contract. It also offers confidence for the seller in the purchase offer.

Seller's Contribution refers to funds the seller agrees to provide to help the buyer with closing costs, such as origination fees (including rate buydowns), title insurance, and property taxes. This contribution is often used as an incentive to make the property more appealing or to facilitate a quicker sale. Typically, it's negotiated during the sale process and is part of the purchase agreement.

Seller Buy Down is a great tool when interest rates are trending up. The seller’s contribution is used to buy down or pay the points for a lower interest rate for the buyer. You may see this term in the listing details, this can attract more buyers whereas sometimes a price reduction will deter buyers. The savings are maximized for all parties.

For example, instead of the seller reducing the list price by 15K, you could opt to subsidize the buydown for a lesser amount. It's a win-win since the seller can maintain the sales price and the buyers get an affordability boost, with lower monthly payments opening the door for more buyers.

Seller 1-2 buy downs are another way the seller can offer financial assistance or incentives to buyers in an environment with higher rates. The loan starts with a low interest rate in the first year, increasing in the second, and aligning with the market rate at the time of purchase in the third year. It is a great option for a buyer who anticipates higher income in the future and need lower initial payments to get in the home.

Whether you're a buyer or seller, numerous strategies exist to navigate the real estate and stay in the “game”. The key is to build a team of transparent, communicative, and trustworthy professionals to guide you through the process.

Jen Shedrick

e-Mortgage Consultant

Prosperity Home Mortgage LLC

(C) 202-945-2466

(O) 571-733-9604

(F)  833-408-2005 https://jennifershedrick.phmloans.com/ NMLS #2010668

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