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Three Reasons Why Pre-Approval Is the First Step in the 2020 Homebuying Journey

February 3, 2020 by Bob Elliot Leave a Comment

When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.

1. Gain a Competitive Advantage

Low inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.

2. Accelerate the Homebuying Process

Pre-approval can also speed up the homebuying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

3. Know What You Can Borrow and Afford

Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.

Freddie Mac sets out the advantages of pre-approval in the My Home section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

Local real estate professionals also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. Once you select a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac also describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:

Capacity: Your current and future ability to make your payments
Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash
Collateral: The home, or type of home, that you would like to purchase
Credit: Your history of paying bills and other debts on time

While there are still many additional steps you’ll need to take in the homebuying process, it’s clear why pre-approval is always the best place to begin. It’s your chance to gain the competitive edge you may need if you’re serious about owning a home.

Bottom Line

Getting started with pre-approval is a great way to begin the homebuying journey. Let’s get together today to make sure you’re on the fastest path to homeownership.

What’s Ahead For Mortgage Rates This Week -February 3rd, 2020

February 3, 2020 by Bob Elliot

What’s Ahead For Mortgage Rates This Week –February 3rd, 2020 Last week’s economic reports included readings on home prices, new and pending home sales and a statement from the Federal Reserve’s Federal Open Market Committee. The University of Michigan issued its monthly statement on consumer sentiment and weekly reports on mortgage rates and first-time jobless claims were also released.

Case-Shiller: Home Price Growth Picks Up in November

According to Case-Shiller’s National Home Price Index for November, home prices rose by 3.50 percent on a seasonally-adjusted annual basis as compared to October’s reading of 3.20 percent. Case-Shiller’s 20-City Home Price Index showed that home prices for cities included in the Index rose 2.60 percent year-over-year. All 20 cities showed growth in home prices on a month-to-month basis.

Cities with top rates of home price growth have shifted from high-cost coastal metro areas to more moderately priced areas inland and in the South. Phoenix, Arizona reported a reading of 5.90 percent growth in home prices year-over-year and has held first place in the 20-City Home Price Index for six consecutive months.

Charlotte, North Carolina held second place with a year-over-year home price gain of 5.20 percent. Tampa, Florida reported a 5.00 percent gain in home prices and held third place in the 20-City Index.

New Home Sales dipped by 3000 sales in December to a rate of 694,000 sales on a seasonally-adjusted annual basis. December sales of new homes fell short of the expected reading of 735,000 sales according to the Census Bureau and U.S. Department of Housing and Urban Development. The seasonally-adjusted inventory of 327,000 new homes available represented a 5.70 months supply of new homes based on the current sales rate.

In related news, the National Association of Realtors® reported fewer pending home sales in December; all regions reported fewer pending sales in December as compared to November. Pending sales in the Northeast were -4.00 percent lower; pending sales in the Midwestern region fell by -3.60 percent and December’spending sales in the South and West were -5.50 percent and -5.40 percent lower respectively.

The steep drop in pending home sales was attributed to slim inventories of available homes, but fewer buyers make offers on homes during the winter holiday season. Pending sales represent homes for which purchase offers have been received but not closed.

The Federal Open Market Committee of the Federal Reserve unanimously voted to hold the Fed’s benchmark interest rate at a range of 1.50 percent to 1.75 percent. Fed Chair Jerome Powell said that current domestic economic conditions were strong, but he also noted potential unrest in global economies due to factors including the outbreak of a highly contagious Asian flu virus.

Mortgage Rates and New Jobless Claims

Freddie Mac reported lower average mortgage rates last week with the rate for 30-year fixed-rate mortgages nine basis points lower at 3.51 percent. Rates for 15-year fixed-rate mortgages averaged four basis points lower at 3.00 percent; interest rates for 5/1 adjustable rate mortgages were four basis points lower at an average of 3.24 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages,

Fewer first-time jobless claims were filed last week; 216,000 new claims were filed as compared to 223,000 claims filed the prior week. The University of Michigan reported that consumer sentiment rose to an index reading of 99.80; analysts expected a reading of 99.10 based on December’s reading of 99.30.

What’s Ahead

This week’s scheduled economic reports include readings on construction spending, public and private-sector job growth and the national unemployment rate. Weekly readings on mortgage rates and new jobless claims will also be released.

FOMC Statement: Key Fed Rate Unchanged; Policymakers Monitor Impact of Asian Flu Outbreak

January 31, 2020 by Bob Elliot

FOMC Statement Key Fed Rate Unchanged; Policymakers Monitor Impact of Asian Flu Outbreak The Federal Open Market Committee of the Federal Reserve issued its scheduled post-meeting statement Wednesday. Policymakers unanimously decided to leave the target federal funds rate range unchanged at 1.50 to 1.75 percent.

FOMC members reasserted previous views that inflation was “subdued” and the economy was growing at a moderate pace. The Fed typically bases decisions about interest rates on its dual mandate of achieving maximum employment and an annual inflation rate of 2.00 percent.

U.S. Economy Strong, Fed Chair Sees No Immediate Risk From China

FOMC cut the target interest rate range three times in 2019 to offset higher prices associated with a trade war with China, but the Committee considered recent progress in trade negotiations as an indication that there was no current need for further rate cuts. Fed Chair Jerome Powell said he was not concerned about immediate risks from China.

In its current assessment of economic conditions, the Fed cited a strong labor market and job growth but said that business investments and exports were weak. Core inflation readings, which exclude volatile food and fuel sectors, consistently ran below 2.00 percent. The FOMC changed language in its statement to indicate a goal of achieving an inflation rate of 2.00 percent; previous statements referred to an inflation goal of near 2.00 percent.

Committee members will continue to monitor current and developing economic conditions to determine when or if to change the benchmark interest rate range in future meetings.

Fed Chair: Fed Is Monitoring Potential Impact Of Coronavirus Outbreak

Concerns over trade conflicts with China were overshadowed by an outbreak of a strain of Asian influenza in China. The disease, caused by a coronavirus, is extremely contagious and spreads quickly. This could impact global economic conditions as international air travel and shipping may be limited or stopped to prevent further spread of the virus.

Fed Chair Jerome Powell said that although the Fed is not worried about an immediate threat, the FOMC members would continue to monitor how and where the current outbreak of Asian influenza spreads to determine if changes to the Fed’s monetary policy positions are necessary. Tensions in the Middle East were not mentioned in the FOMC statement or Fed Chair Jerome Powell’s post-meeting statement.