Do This Before You Submit Your Offer

Dated: February 12 2024

Views: 26

Welcome to Page Realty Live. My name is Chris Rao, and together with my parents, we run a family-owned and people-first brokerage here in Massachusetts. The goal of all this is each week we'd like to bring you some interesting local stories, some insights, and some happenings on what's going on in the real estate market, so that you can be better educated and hope you enjoy.

 

It's been a few years, yeah. Last year was a gritty year, you know what, um, uh, but this year, uh, I'd say there's definitely optimism in the, uh, in the marketplace. Um, it's shifting, you can feel it shifting, you can feel it shifting. Everything that we see, that we hear, and, you know, there's like signals. Um, don't have the intrinsic data yet to, like, back it up, but I can give you some.

 

December was pretty quiet in terms of pre-approvals. I mean, I was a great husband, I picked up kids from school, I had loans, but they were all closing. There wasn't a lot of proactive, there wasn't a lot of preapproval work to be done. Okay, first week of January, and even that week between Christmas and New Year's, I mean, it picked up like crazy. Slam, yeah, every day there was a new phone call for a new pre-approval.

 

Now, is that an indication of housing prices or anything else? Absolutely not. It is not an indication of where rates are going. It is not an indication of anything other than people are interested in buying homes and there will be at least reapproved shoppers out there this spring, right? It's a gauge of interest in the marketplace and you're on the front lines of that.

 

You know, the very first step for them to even go look at a house and potentially offer on it is making sure they've got their paperwork in order to make sure they're looking at things that they can afford and is within their monthly budget and things like that. So you're definitely a leading indicator for like, like how many pre-approvals you're doing in a month or something like that.

 

And that's really the key. And I tell people this all the time, but for folks that are interested in maybe potentially thinking about buying in the upcoming year, even if you don't think you're buying now, the earlier you have the conversations with your preferred lender, with your realtor, put together your home buying team and start to build out that process, the better. It's sort of a, it's not a fix it and forget it sort of situation when you get preapproved. But if you put together a solid pre-approval, upload all your documents, you actually go through the underwriting process, and you actually get a solid preapproval, the only thing left that you should be adjusting for is the property.

 

Right, so I mean, unless your income changes, unless you decide to go out and buy a new car, unless there's an employment change, um, the only variables that are really changing are the taxes, the house, the interest rates. And those are adjustable or those are variables that we can adjust for in the pre-approval process to make sure that everything you're shopping for stays within budget, both on your total monthly goal or total monthly payment and your out-of-pocket costs. And those are easy things to adjust for whether that's this week or a month and a half from now or 3 months from now or in some cases 6, 7 months from now, those are easy things to adjust for.

 

I'm going to shift gears here on you, but because I don't want to talk about rates in specific right now. Rates are as of, you know, mid-January. What are you seeing in the marketplace?

 

It depends, obviously. I mean, but I mean, you'll see stuff from low to mid-sixes all the way up to low sevens depending on the product and qualifications of a given borrower. And that's the really important thing to keep in mind. Like I'm not a big let's quote rates type person because they do change daily. It's a moving target all the time, 100%.

 

But you can always look at the averages. I mean, go to Freddie Mac, if it's a conventional mortgage, go to Freddie Mac, go to Mortgage Daily, and they'll tell you what the average rates are. So, my question is though, when people who let's say people who bought last year when rates were in the sevens, okay, maybe even low eight, you know, something like that, when does it make sense for them to start thinking about reaching out to refinance?

 

You know, is like, is there a certain time, like is it six months where you can't do anything even if rates drop? It so depends, it depends.

 

Okay, um, realistically, yes, most lenders will tell you that there is a six-month sort of waiting period. Um, we can get into kind of the behind the scenes on why some of that stuff is, but it has to do with the way mortgages post and bond and the way lenders get paid and the way the banks pay their employees. It gets sort of messy on that end.

 

The reality is if you think you are going to need to refinance, and I'm going to separate this into a couple of categories. If you are self-employed and you bought a house in the last two years and you think you're going to want to refinance in the next 2 to 3 years, make sure to get your taxes not only done but submit them early. You can work with a lender, submit drafted tax plans, submit books, and work through, hey, what would my qualified income be based on the way that I'm planning to file? The earlier you can have those conversations, the better.

 

This is one of those things that often goes overlooked is like, I bought the house, now let's write everything off. And then you go to refinance and they're like, actually, you don't qualify to refinance the home that you're in, even though you have a lower payment and it doesn't make any sense.

 

No, but qualified income is a thing that we will look at. So for self-employed borrowers, huge piece of advice, speak to a lender. The earlier you speak to a lender, work through draft documents, sometimes saving $500 on your tax bill is not worth a couple thousand that you're going to cost yourself in qualified income. Just a heads up, good point there, good pro tip.

 

For a traditional borrower, to get to the question like when do you start asking? Personally, I'm a big fan of give your preferred lender heads up very early on, put it on the radar screen. We can watch. I have programs that I send my clients up for where we can literally rate watch with you and for you and try to keep an eye on the equity that's available and when it makes sense to refinance.

 

Typically, if you're about half a point lower, it's probably going to make sense from a monthly cash flow standpoint to refinance. But a lot of that depends on so many other variables that it really is a much more involved conversation.

 

I can share some stories or examples, but it's okay. I think that gives people a gauge, like they should obviously, you know, get in contact early, and

 

 start building the relationship and just have a running conversation about it and keep an eye on the market. And then if it makes sense, take the plunge.

 

Absolutely. Absolutely, it doesn't mean you have to pull the trigger. We could have the conversation, figure out if it's worth it, figure out if it makes sense, if it doesn't, then don't do it. There's no hard fast rule that says just because it's half a point lower you should refinance. If you're planning on selling the house in a year and a half, I'm not going to recommend you refinance. It's not worth it. You're going to spend more money in closing costs than you'll save in that period of time.

Right. So really it's about having those conversations with your lender, seeing what makes sense for your specific situation and then making a decision from there. Absolutely. Absolutely, couldn't have said it better myself.

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Timothy Lumnah

Hello, I’m a REALTOR® and Certified Buyer Representative graced with the great honor of buying and selling homes for the community of Greater Boston. I grew up in Massachusetts and work....

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