1: Buyers: Get Pre-Approved & Know Your Options When It Comes to Interest Rates
When buying a home, the first step should always be connecting with an experienced loan officer who can help you get pre-approved (not just pre-qualified) for a mortgage loan. While pre-qualification offers a starting place for you to understand the price range you may be able to afford, pre-approval takes it a step further. In the pre-approval process, a loan officer verifies your financial information and gives you a definitive maximum budget (subject to changes in mortgage interest rates). In addition, a pre-approval letter shows sellers that you are a serious buyer, can afford to purchase the home, and can close more quickly than a buyer without pre-approval.
It is also essential to understand your options with mortgage interest rates, which have been rapidly changing. Recently, mortgage rates increased to over 7% for the first time since 2001 but dropped again last week to 6.5%. Wondering why this matters? Mortgage interest rates impact real estate prices and affordability. An increase or decrease of even half a percentage point can equate to several hundred dollars added or subtracted from your monthly mortgage payment. This is especially true in Santa Cruz, where the median home price was $1,456,270 in September.
Working with a mortgage loan officer and an experienced Realtor who can help you understand your options regarding mortgage interest rates can help you significantly lower your monthly housing payment. Your mortgage loan officer will present you with the loan products available to you and help you understand the unique benefits of each so that you can make an informed purchasing decision. Your Realtor can help you negotiate a seller buy down, which can help in multiple ways, such as:
- permanently lowering the interest rate over the life of the loan
- temporarily lowering the interest rate by up to 3% for the first 1-3 years, depending on your specific goals.
If you are currently in the process of buying a home, be sure to ask your Realtor about these options, as they can save you a significant amount of money in the long run.