Why Mortgage Interest Rates Should Matter to You

It seems that everyone is talking about how low mortgage interest rates have been.  They have been considered low for so long now that perhaps people are starting to assume they will just always be this low.  Maybe the deluge of  information we are bombarded with on a daily basis has caused the message to lose its punch.  But are they really that low?  What is low?  Low in relation to what?  Where have the interest rates been in the past?  What does this mean for home buyers? All these are questions a potential home buyer should be asking when determining if now is the right time to buy.   

What are Mortgage Interest Rates?

Without getting overly complicated with it, a mortgage rate is the rate of interest charged on a loan.  In other words, it determines the amount of money the bank will charge you for borrowing their money.

What Determines My Mortgage Rate?

Banks will use your credit report to determine what your interest rate on the mortgage will be.  The higher the risk you are the more they will charge you to borrow money resulting in a higher interest rate.  Does this matter?  Absolutely!  The higher the interest rate the higher the mortgage payment!

As of 8/25/2016 mortgage rates are hovering around 3.40% if you have good credit.  Now mortgages have a lot of moving parts that determine payment amount, but for this article we will only look at interest rate. Things such as down payment, bank fees, escrows for home owners insurance and property taxes, and term of the loan all play a role in determining what the home owner will pay each month.  So with that being said, if you have good credit and wanted to buy a $200,000 home you could expect your principal and interest payment to be around $880 per month.  But what happens if you get a higher interest rate?

Let's say you have some challenges on your credit and you get a slightly higher interest rate of 4.50%.  That changes the principal and interest payment to $1013 per month. For the same home!! So you can see how your credit is one of the main driving forces behind what interest rate you will get on your home loan. Which in turn will ultimately determine what you will pay each month.

That's why the interest rates being where they are is so huge for the housing market.  A home buyer can get much more home for their money than they could say 10 years ago.  In 2006 mortgage interest rates were hovering around 6.40% and this was considered good for that time period.  So let's look at what the principal and interest payment would be with that interest rate. At an interest rate of 6.40% the principal and interest payment would now be $1251 per month!  That is a $371 per month difference!  That means it costs $371 less per month today than it did 10 years ago to borrow the same amount of money.  

How High Have the Interest Rates Been?

So, just how high have the interest rates been in the past?  In 1981 mortgage interest rates were hovering around a staggering 17%! That means for the same loan as above, the monthly principal and interest would be a whopping $2,851 per month. 

I hope this article helps you better understand just how important interest rates are in determining your mortgage payments.  So make sure to keep your credit in good standing in order to not be stuck paying a higher mortgage payment.

If you have any questions please feel free to comment below or contact me!

Should You Buy a Foreclosure?

There are still a lot of foreclosures on the market today. As a matter a fact, according to a study by RealtyTrac, one in every 1261 housing units in North Carolina filed for foreclosure in the month of December.  And while some of them can provide a chance at a great deal, there are some serious factors that any buyer should keep in mind when contemplating the purchase of a foreclosure.  Ok so let's dig into this.

SOLD AS-IS
Probably one of the biggest potential dilemmas you will face when buying a foreclosure is that they are sold AS-IS.  Which of course means you agree to buy the property just the way it sits regardless if the fixes are minor or if they are extensive.  Trust me there is a big difference between patching and painting walls and replacing a leaking roof or fixing foundation issues.  There are a lot of systems that can malfunction in a home.  This is something you have to be keenly aware of and why it is so important to have a great agent on your side to make sure this is addressed.  In other words, be prepared to hire professionals to assess all major systems of the home to make sure you are not in for a dreadful surprise when you move into your new abode.  A great agent will help you traverse this facet of the home buying process.

NOT MOVE IN READY
It stands to reason that if the home you are purchasing needs extensive repairs you most likely will not be able to move in right away after closing.  You will be busy hiring contractors to take care of all the issues meanwhile living out of a suitcase at a hotel, or even worse your in-laws!  Just kidding, you may have wonderful in-laws, as I do, but when it comes down to it do you really want to live with them for an extended period of time?  For that matter, do they want YOU living with them?  Now of course not all foreclosure purchases will necessitate this but it is something you have to keep in mind and plan for.

EXTRA TIME TO CLOSE
In a traditional sale, in most cases, you are dealing with a homeowner who has decided to sell their home for one reason or another.  This means they are motivated to sell because they want to move too or they have already moved and are trying to avoid paying two mortgages.  However, in an REO (lender owned) property you will be dealing with the bank's asset manager.  And while he or she wants to unload these properties they are dealing with multiple properties, multiple offers, and multiple agents. This inevitably can lead to longer processing times on your offer.  Also, like a traditional sale, they can reject or counter your offer leading to increased wait times on getting an agreed upon purchase contract.  Is this always the case?  No, but it is more often than not the norm.  Much of this depends on the market and the size of the bank you are dealing with.

Ok so at this point you may be thinking "why in the world would I ever want to buy a foreclosure?" The truth is there are some really good pros to buying a foreclosed property also.

LOWER PRICES
This is obviously one of the most attractive pros to buying a foreclosure right? It's an opportunity to buy more home for your money! Foreclosures are often sold for less than traditional homes but this usually depends on the property itself. A higher end home that doesn't need a ton of work will offer less of a discount than a home that is a fixer upper. It is extremely important to have a great agent that can do a CMA for you to tell what similar homes in the area are selling for. That way you can gauge just how good the deal really is.

INSTANT APPRECIATION
And of course if you are buying the property for less than what other similar homes in the area are selling for this will provide you with a high chance of experiencing instant appreciation. Appreciation is the amount your homes value increases over time, and since you bought it at a discount this a lot of times will lead to fast appreciation of your property. Which will make you very happy if you decide to sell down the road.

LESS COMPETITION
Because of some of the drawbacks to buying a foreclosure, listed above, there are fewer owner-occupants placing bids.  This puts you in a position of having less buyers to compete with on your offer.

There are many pros and cons to buying a foreclosed property and there are many other factors that should be considered before making an offer.  Having a great agent is key in deciding if it is right for you and your situation.  It is imperative that you weigh the purchase price against any repairs that are needed to make sure you are making the most educated decision and that you are truly getting the deal you think you are.  Please feel free to contact me with any questions that you may have.  I would be happy to help you in your home buying endeavor.

Why it's Not A Bad Idea to Sell Your Home in the Winter.

I know what you're thinking.  "Come on man, everybody knows that Spring and Summer are the best time to sell your house."  I hear you.  But while Spring and Summer are typically the busiest seasons for home sales there are some advantages to selling in the winter that you may not have thought of.

Think about it, if you are trying to sell ANYTHING would you rather have more or less competition?  I bet your answer is "well, less of course!"  If it wasn't, it should have been!  Less competition means that you have put your home on a proverbial pedestal for all the home buyers to see.  It really boils down to the basic economic principle of supply and demand.  When supply (homes on the market) is down and demand (home buyers) is high, that could mean good things for you and your pocket.  You could end up selling your home faster and for more money!

"Well that's all fine and good, but there are no buyers in the winter."  I'm glad you brought that up! That may have been true back before technology made it possible to search for homes from the comfort of your own home while sipping hot chocolate.  Yum, hot chocolate...sorry I trailed off their for a second.  Back to it.  Today 94% of home buyers start their search online according to an article from the National Association of Realtors...94%!  That means that cold weather will not stop a home buyer from searching for YOUR home on their computer or mobile device no matter the temperatures outside.  And if you think about it not only are people searching for homes in the winter, it would make sense that more serious buyers are looking in the winter.  I know that I wouldn't get all bundled up in a coat, hat, scarf and gloves to go to an open house or viewing unless I was serious about finding a home.

Putting your home on the market in the winter with less competition can truly put your home in a great position to be sold faster and for more money.  There are serious buyers out there in the winter and the season is not going to stop them from jumping at the opportunity to buy your home.  Don't let the off-season scare you away from selling your home.

Why You Need a Buyer's Agent

With the abundance of real estate technology out there these days, it may make you wonder "why do I even need a real estate agent?"  While these sites and apps may make you feel like you have this home buying thing down, there is a lot more to it than just finding the location of a new home.  Individuals still need a professional to help them through the transaction process and all other aspects of buying a home.

I have put together a list of reasons buyers need representation, as well as some of the benefits an agent provides to their client.  This of course should not be considered an exhaustive list but more of a Top 5 if you will.

1. No Cost to You!

That's right! No cost.  In almost all cases the seller will be the one to pay the commissions.  I mean, I could probably stop the list now.  This should be reason enough to have representation.  You can hire a professional who knows the entire process backwards and forwards, has your best interests at heart, and will guide you the whole way...and you pay them nothing!

2. Negotiating the Deal.

A great buyer's agent will fight hard for you to obtain the best possible deal.  There are a lot of factors in negotiating a purchase agreement.  Probably the most important to most buyers is of course price, but there are other things that can be negotiated.  Such as date of possession, inclusion of repairs and furnishings, just to name a few.  There is no replacement for a great agent negotiating on your behalf to make sure you get what you want and you don't pay too much for it.

3. Maneuvering Through Potential Hazards

Having an agent on your side while you traverse the sea that is home buying can be indispensable.  Remember they have been here before and can often sniff out problems before they arise.  A great agent will search for potential pitfalls, before you have a chance to step off the edge of that pit.  Let's face it most real estate transactions have hitches, some more than others, but doesn't it make sense to have someone on your side to make sure you don't land yourself in a deep financial and stressful pit.  Of course it does, and did I mention they do this at no cost to you..(See reason #1.)
 

4. Market Knowledge

Real estate agents have access to a wealth of recent market data.  Because of this, a great agent will be able to give you realistic purchase prices based on this information.  Why should you care?  Because you don't want to end up paying more for your home than all the other comparable homes in the neighborhood do you?  Of course you don't!  A great agent will scope out what other comparable homes in the neighborhood has sold for over the last several months to make sure you don't end up paying more than you should.   

5. Buyer's Agents Work For You

When you contract with an agent they are legally bound to work for your best interest.  That truly offers you an incredible amount of leverage in your home buying endeavor.  Some buyers think that if they call the agent on the sign they will get a better deal but most of the time this couldn't be further from the truth.  Think about it, the agent on the sign has contracted with the SELLER to help sell their home and consequently has the SELLER'S best interest at heart.  So why not bring your own agent to the table to fight for your best interests.  

If you are still reading this thank you for sticking with me and making it this far.  As you can see, whether you are buying your first home, upgrading or downsizing, having a great agent on your side just makes sense.  And did I mention they do this at NO COST to you!

Wow! My very first blog post...

Hello everyone!  My name is Nathan Smith and I am a Realtor in the Triad area of North Carolina.  I have lived in this area of North Carolina my entire life and I just could not imagine living anywhere else.  I love my state and I love helping my fellow North Carolinians buy and sell their homes.

I wanted to start this blog to provide relevant information for buyers and sellers about the real estate market and how to be better prepared for the journey of buying or selling a home. Having a great Realtor can be a valuable asset in many ways and I hope to provide information to show you just how beneficial having a great Realtor can be.

So, with that my first post is done...whew! Please connect with me on the following social media outlets.

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