Buying a home comes with challenges. If you want to take the challenge up a notch, purchase a condominium. When buying a home, the borrower always needs to be approved in terms of credit, income, assets, etc. When purchasing a condominium, the project itself also needs to get approved.
There are a few things that can stop approval of a condominium regardless of how well qualified a buyer may be. Let’s discuss a few of those. Remember, this is only for a home considered to be a condominium. If someone is purchasing a single family home, none of this applies to the approval process.
Operating Budget: The Home Owner’s Association (HOA) budget must save 10% of the annual budget to reserves/savings. No exceptions. If the annual budget is $600,000, then $60,000 (or more) must be put into reserves.
Litigation: Is the HOA named in a lawsuit? This can be problematic depending on the nature of the suit. It isn’t necessarily a deal killer; however, it is definitely a hurdle to get past!
Ownership: If one individual (or entity) owns 10% or more of the units in a project, the project will not be approved.
Delinquency: Are 15% or more of the owners in the project delinquent on their HOA dues? If yes, this can also cause a problem until the delinquency rate is reduced.
Mixed Use Buildings: if too much of the square footage of a building is dedicated to commercial space (think businesses on the first floor and residential on top), this will also be a problem. The current guidelines have commercial/mixed-use space capped at 35%.
Investment Properties: if more than 50% of the total units are rented out as investment (non-primary residence or second home), this is also likely to lead to a denial.
None of those points even gets into the additional information condo projects need to provide in terms of structural, safety, repair issues stemming from the condo building collapse in Florida in June 2021. I am not downplaying/glossing over the tragedy of that day/complaining about more guidelines. I’m simply saying this horrific event added more to getting condo projects approved.
What should buyers who are interested in purchasing a condo do? I suggest getting as long of a financing contingency as possible for the approval of the condo project itself. If a buyer is thinking of waiving the financing contingency, then they should speak with their agent about adding a special stipulation to the contract protecting their earnest money in the event the condo project ultimate is not approved.
I close lots of condos, but they can be challenging. Protecting one’s earnest money and doing some research on the project prior to making an offer is the way to go as unexpected things happen.
Are you in a position where you don’t know if a will be approved? If the condo is in the state of Georgia, contact me. I can help coach you on things to request/review to see if it is likely a condo will be approved and map out the best way to proceed toward buying the home.
The era of ultra-low mortgage rates is over. Low rates flourished for 11 years, as the 30-year mortgage remained below 5% from February 2011 to April 2022. Since then, rates have remained mostly above 5%, averaging 6.72% in June in Freddie Mac’s weekly survey and over 7% in July and August.
Some forecasters predict that rates will decline over the next 12 months (could be challenging without a recession, and more on this topic next week). Even with a decline, they don’t foresee rates dropping below 5% anytime soon.
For those looking to buy a home, it’s tempting to be in denial about the state of mortgage rates. “People are still working through their five stages of grief on this mortgage rate stuff,” says Lisa Sturtevant, chief economist for Bright MLS, the real estate listing service for the mid-Atlantic region. “And I think you have to reach the stage of acceptance at some point that certainly rates aren’t going to come down to where we were back during 2020 and 2021.” (When the median 30-year rate was 2.99%.)
Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors all forecast a gradual, moderate decline in mortgage rates through at least the first three months of 2024. Those three organizations are not alone in their prediction that mortgage rates will go down, but no one expects rates to plunge back to where they were two years ago. “I still think we’re going to see rates stabilizing and then moving slowly down this year and we’re going to end 2023 at 6%,” Sturtevant says. Danielle Hale, chief economist for Realtor.com, said in an email that “our base expectation is that it will take until the end of this year or early next year before mortgage rates get back to 6%.”
It’s not realistic to put a home purchase on hold in the hope that mortgage rates will return to 2020 and 2021. The median rate over the past 30 years is 5.77%, and we’ve returned to this reality.
For those looking to buy their first home, they’re probably going to pay well above 5% on a 30-year mortgage, and need to establish a budget with this in mind. While current home owners may dread giving up a lower rate to purchase a new home, eventually “life moves on.” People needs change… downsizing, growing family, retiring, new job, etc. It is hard to keep life on hold over a low mortgage rate.
Embracing this new mortgage rate reality will hasten people toward owning a house that meets their current needs. And as discussed previously on this blog, budget for the purchase now knowing there could be a chance to refinance later. Even if rates go from 7% to 6% (as forecasted), this is a $230 savings per month. Rates change, but finding the right home in our low inventory environment is hard. Budget, find the right home, and maybe get lucky with a refinance in the next year or so.
If you are looking to purchase your new home in the state of Georgia, contact me today! As we approach the last few months of the year, the past two winter seasons have been slower in terms of buyers out in the market. Keep this in mind. Perhaps this winter will be the same. Beat the 2024 Spring rush and buy in 2023!
Happy New Year! Yes, 2023 is a great time to purchase a home. I am well aware if you do a search for “is now a good time to buy a home?,” one is likely to find plenty of articles saying now is a bad time to purchase. While there are many good points in these articles (I’ve read a lot of them), they all seem to be missing one important thing…
Competition.
Or perhaps I should say, the lack of competition.
Follow with me for a moment… in 2020-2021, the market was crazy. Sellers were receiving 5, 10, 20+ offers on a home (one agent I know received over 100 on a listing!). The offers were always over (sometimes way over!) asking price. Every offer waived some contingencies, and most waived all of them. This means the buyer had no protection on their earnest money and had to buy the home “as is,” or forfeit their earnest money if they decided not to buy the home.
This isn’t a great way to buy a home. As we moved into mid and late 2022, the market shifted. Yes, there are still multiple offers on homes. Yet it is only a few offers on most homes. Properties are going under contract at/around list price, and buyers are getting contingencies on their contracts (not to mention sellers giving money to closing costs!).
There are many reasons to consider waiting to buy a home (rates are higher, home prices are high, inventory levels are low, a looming recession). Why should someone consider buying right now? To me, it is simply competition…
Many would-be buyers will sit this spring market out because everything they read says “now is a bad time to buy a home.” Let’s say the stories change this time next year. For example, prices have leveled out, mortgage rates have lowered, so 2024 is a great time to buy. Do you know what that means? Competition will be fierce! Buyers in my “spring market 2024” example would include:
Everyone who decided to push off buying a home in 2023 because it “isn’t a good time to buy a home.”
Everyone who planned on buying a home in 2024.
Some who planned to buy in 2025 or 2026 and decided to move up their timeline because “now is a good time to buy a home.”
When the mood shifts to now being a “great time to buy a home,” inventory levels will still be low. The supply-and-demand dynamics dragging inventory levels (too many buyers and too few homes available) isn’t going away anytime soon. The market will resemble to craziness of 2020-mid 2022.
Yes, mortgage rates are higher, but finding the right home is hard. It is way easier to refinance a home you already own versus fighting the crowd to get a home when rates are lower. I’ve bought two homes in my life, and refinanced them both.
Regardless of what is in the news, taking the long term view, now is a great time to buy a home. If you are buying in the state of Georgia, contact me today. I can get you ready to make an offer on a home in just a few minutes!
We all know rates of all types have moved higher. It is all over the news, savings accounts at banks are paying more interest to the account holders, car loan rates are up, home loan rates are up, and the housing market has slowed… yup, rates are higher.
So now what?
Last week I mentioned how the housing market is returning to historical norms. Well so too are mortgage rates. Take a look at mortgage rates over the past 50 years:
Even with a rate in the 6% range, rates are still lower than the historical average since the 1970s. I do not mean to sound flippant. I know it is a struggle when would be buyers have lost 20% of their purchasing power this year due to higher rates. I know it is hard out there.
We are accustomed to lower rate as they’ve been pretty low since the housing crash in 2008, and it is hard transitioning to where rates are today. So this is what I am telling clients now as we navigate higher interest rates – the home is long term. Interest rates are not.
Find the right home and buy it, own it, and live in it. While double digit annual appreciation is gone, homes still appreciate in value. Even when we saw the housing crash, home values came back (and a big crash like that has only happened twice… once during the Great Depression in the 1930s and the other from the housing crash).
Rates change and fluctuate. Look back at the chart in this post. Year over year, rates move up and down. I’ve owned two homes in my life and I’ve refinanced each of the homes (one of the homes I refinanced twice).
For roughly two years people were willing to go way over asking price, waive all contingencies and home inspections, offer to cover appraisal gaps, etc. Now homes are going at (and sometimes less than) their list price. There is less competition out there looking to buy. Sellers are giving money for closing costs, and buyers have contingencies and protections in their contracts again.
Yes, rates are higher, but buying a home is easier now than it was just a few months ago! Finding the right home is hard and a long term decision. The interest rate isn’t permanent and one can refinance to a lower rate to take advantage of a rate dip, and it will happen at some point in time.
When comparing the two, finding the right home is hard; whereas getting a new interest rate is easy.
For those looking to buy a home in the state of Georgia , contact me today to get started. I can have you well on your way to being ready to own your new home.
Housing affordability has become a key concern in the real estate market, amid rising mortgage rates and double-digit annual house appreciation. The average monthly payment is 50% higher than a year ago! Those rising costs are sidelining more aspiring home buyers.
Signs are surfacing that the housing market could be slowing, and that could put less pressure on home prices. For the fourth consecutive month, sales of new homes dropped, reaching their lowest level since the pandemic. Existing-home sales also decreased in April, falling for the third consecutive month and down nearly 6% compared to a year ago, according to National Association of REALTORS® data.
These trends should offer some hope for buyers. The drop in sales should equate to less competition for buyers who are eager to buy yet keep getting beat out on offers. We may also see the trend of remote work continue – for instance, relocating to an area offering homes that meet their needs without breaking their budgets.
Yes, rates are higher. Yet for those who need to move and couldn’t get under contract due to intense competition, the current trends do offer hope of a calming market (in terms of the number of buyers and home values slowing down).
Last year I discussed seniors holding onto their homes longer than previous generations. It seems this trend moved into Generation X too.
According to AARP’s newly released Home and Community Preferences Survey, seventy-seven percent of adults 50 and older say they want to remain in their current homes over the long term. Some respondents said they already live in a home that allows them to age in place, such as with a bathroom on the main level or a room on the first floor that could be used as a bedroom. Then a third of participants said they would need to modify their current home so they or a loved one could live there.
Those who do not want to remain in their home are looking for something that is better to age into and requires less maintenance.
Meaning, a majority of people already feel they are in a home they can age into over the coming years (decades) and have no plans to sell their home. This lack of downsizing is hurting the market in terms of the number of homes listed. Those 50 and over are making plans to stay in place more than moving into retirement communities, assisted living, or downsizing to a condo… fewer single family homes are coming back on the market for resale.
Let’s go builders! We need some new homes on the market to help with the inventory crunch!
As I conclude this February series on preparing for the Spring market, obviously, it is still a competitive market. Now is a good time to get ready to purchase a home. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.
It’s a new year…. we so looked forward to 2021 being better than 2020 (it didn’t seem to be in a lot of ways), so here is hoping 2022 will be better!
For the month of February, I am starting a series for the Spring Market so buyers and sellers have a general idea of what they are getting into this year. Home sales and home prices likely will moderate from recent highs in the new year, and buyers may have better opportunities in 2022, but the fact remains the housing market will be competitive.
“Americans are poised for a whirlwind year of home buying in 2022,” says Danielle Hale, realtor.com®’s chief economist. “With more sellers expected to enter the market as buyer competition remains fierce, we anticipate strong home sales growth. Affordability will increasingly be a challenge as interest rates and prices rise.” Realtor.com® released its 2022 housing forecast, including noting some of the following trends expected for the new year:
Suburbs are still the place to be: The pandemic continues to modify what Americans look for in a home. One in five homeowners looking to sell and move no longer need to live near their office.
Millennials are eager to finally move: Forty-five million millennials are in a “homebuyer sweet spot,” realtor.com® says. That many of them will fall within the prime first-time homebuying age range of 26 to 35 in 2022.
Affordability challenges remain: Home prices, rents, and mortgage rates are all expected to be on the rise in 2022. The 30-year fixed-rate mortgage is expected to average between 3.5% to 3.6% by the end of 2022. Home prices likely will increase at a “gentler pace” over the next several months as mortgage rates increase.
More homes come on the market: Realtor.com® predicts a 6.6% increase in housing inventory in 2022, a welcome sign to buyers who have complained of few listings over the past year. An increasing share of homeowners this fall reported planning to sell a home over the next 12 months, realtor.com® says.
More supply will also come from new housing construction, which is already underway, as well as the conclusion of the mortgage forbearance program that will likely cause a number of homeowners to sell.
Here is hoping with more homes hitting the market, buyers will begin to see an easing to the fierce competition.
The best way to make an offer more competitive is to have a pre-underwritten loan file when making the offer. I talk about this ad nauseam on The Mortgage Blog and for good reason. When I can tell a listing agent not only have I reviewed my clients pay stubs, bank statements, tax returns, etc., so has an underwriter and they are approved pending an acceptable appraisal, clear title, and proof of home insurance. It really does help.
If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.
Part of the stimulus plan by the Federal Reserve during the Covid caused Recession was purchasing bonds. This was a repeat effort by the Feds just like they did during the Great Recession. Just as they stopped this effort several years ago, they started the process of ending bond buying again.
The process began in November 2021. The Fed was purchasing $120 Billion monthly in bonds ($80 Billion in Treasuries and $40 Billion in mortgage backed securities). It was reduced to $105 Billion (a $70 & $35 breakdown) in November and down to $90 Billion ($60 & $30) in December. This trend will continue until the Fed is completely out of the bond buying business.
What can we expect from Tapering? The main impact for readers of this blog – mortgage rates will rise. Rates were predicted to end 2021 in the low 3s for a 30 year fixed rate loan (they did) and move into the upper 3s by the end of 2022.
How will this impact home loans?
expect a sharp drop in the number of refinances in 2022
we may see a cooling of the housing market in terms of purchase volume, but not necessarily a cooling in housing prices
What will keep prices steady for home sales? For one, sellers who do not need to move may simply take their home off of the market if they cannot get a high price for their home. The bigger story here is the sheer number buyers still looking to purchase a home. Many would-be buyers stopped looking in 2021. With many still wanting to purchase a home, along with Millennials in their prime home-buying years, and an improving economy, signs remain positive for the housing market itself.
While we may be in a new year (hello 2022!), this year should still be another’s seller’s market (although possibly not as severe as 2021).
It is still a competitive market. With the numbers of homes expected to be sold this winter higher than normal, now is a good time to get ready to purchase a home. If you are buying in the state of Georgia, contact me today. In a few minutes, I can have you prequalified and working toward getting your loan pre-underwritten approved.
Expect this winter to be hot for the housing market. There may not be a jump at the Spring housing market in 2022 as the Spring market could be starting now!
“Compared to other past winter seasons, this winter season’s sales activity will be stronger,” says Lawrence Yun, chief economist of the National Association of REALTORS®. “This winter, there will be more sales compared to pre-pandemic winters going back all the way to 2006.”
While there are fewer buyers out during the winter versus spring/summer, the momentum from 2021 will continue through the winter months and into the spring season. All of the activity will keep housing inventories tight!
It is imperative to work with a lender who can have you prepared to buy regardless of the season. If you are looking to purchase in the state of Georgia, contact me today! You can be prequalified in minutes and start on your way to a pre-underwritten file making your offers competitive is this continuing competitive market.
A new analysis by Zillow shows millennials and baby boomers—two of the biggest generations in U.S. history—are both in the market for homes. While we know millennials will be out in force buying their first home and/or buying a larger home as their families grow, a new trend emerges. Americans 60 years and older were more active in the housing market than a decade ago.
With an aging population (assisted by an improving economy), individuals of every age group over 30 were buyers at higher rates in 2019 than those same age groups in 2009. Even as millennials are the biggest players in the U.S. housing market, buyers still trend older. The median age of a recent buyer—somebody who bought a home in the past year—was 44 in 2019 (up from the age of 40 in 2009).
That’s largely because baby boomers, who make up a big share of the population, were also more active in the housing market than those their age just 10 years prior. Millennials must overcome many hurdles when buying homes and one of them being in fierce competition from the next-most-populous generation: baby boomers.
Baby boomers being more active means competition that previous generations did not have when buying their first home. Older buyers have the advantage of a lifetime’s worth of savings and home equity to leverage in a competitive offer.
How does one compete? Regardless of the year, it is always harder to compete against a cash offer. I’ve personally been through this when I bought my first home during the housing boom in the early 2000s. It isn’t fun! When an all cash offer isn’t an option, one way to ease a seller’s mind is being underwritten prior to making an offer.
I talk about this strategy often on this blog, and it is a great option. If a buyer makes an offer to buy a home with an offer letter stating their income, assets, tax returns, etc. have already been reviewed and approved by an underwriter, it is a much stronger offer than an auto generated online letter someone could get by using an online bank or smart phone app. Using the pre-underwriting strategy, the seller knows not only have you spoken with an actual person about your loan, it has been reviewed/approved by a real underwriter!
If you are looking to purchase in the state of Georgia, contact me today! I can help get you underwritten prior to making offers!
Clay Jeffreys is a Mortgage Consultant with Dunwoody Mortgage Services and a writer for “the Mortgage Blog.” If you would like to be a guest writer for "the Mortgage Blog" please contact Clay for details.
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