There are a lot of challenges facing buyers in our real estate market.
There are several different issues facing homebuyers these days. For example, due to pandemic-related economic issues and the tragic collapse of a condo building in Surfside, Florida, new adjustments have been made to mortgage rules and regulations for condos nationwide. Extra due diligence is required from lenders for approving condo units for conventional loans.
Additionally, condo associations for buildings that were built 20 or more years ago that have deferred maintenance, building inspection findings, or jurisdictional findings are under increased scrutiny. The purchase of older condos may be more difficult and expensive for buyers.
Another thing to know is that because of the expanded pool of second-home buyers, mortgages for high-balance loans and vacation home loans will have an extra fee as of April 1, 2022. For high-balance loans, borrowers will pay between 0.25% and 0.75% of the loan amount. For second-home loans, borrowers will pay 1.125% to 3.87%.
“Purchasing a home is more competitive than ever.”
This updated fee structure is meant to increase the capital available to Fannie Mae and Freddie Mac to help first-time buyers and low-income households. This comes at a time when record-high home appreciation and reduced purchasing power make it difficult for these groups.
Other changes include the fact that additional COVID-related paperwork is no longer required for self-employed borrowers. Two years of tax returns can be used instead. Additionally, loan applicants without a robust credit history can now use on-time rent payments to build their credit and get a better loan.
Even with an outstanding credit score, this seller’s market can be frustrating to navigate if you’re a buyer. Sustained strong buyer demand, low inventory, record-high price appreciation, rising mortgage interest rates, and diminishing affordability have made purchasing a home more competitive than ever.
To combat inflation, the Federal Open Market Committee is raising the federal funds rate, which will reduce demand for big-ticket items typically financed by debt. However, as mortgage interest rates increase, buyer affordability declines, and with appreciation being as high as it is, this loss of buying power is felt hardest by first-time and lower-income buyers. So what can you do to combat this?
First, keep your credit score clean and, ideally, increase it. Consider the aforementioned on-time rent payment credit building programs. A higher credit score will always help you secure a better loan.
You should also try to keep your housing costs to no more than 20% of your income. This will stress-test your budget and cash flow and help you understand if this is feasible. Additionally, after you purchase, be very patient with spending, and overestimate what you think you’ll need for expenses like furniture, yard maintenance, and repairs. These tips will make your experience a lot smoother.
If you’d like to take a look at what’s available on the market today, you can view all the homes available on our multiple listing service here. If you would like to get started on the buying process or have questions about how to succeed in this market, please reach out to us via phone at 702-845-8540 or email at bill@soldbyjenkins.com. We would love to help with all your real estate needs.
