Mortgage rates hit a 20-year high, soaring to a staggering 8.03% midway through October. But hold on, there's good news! This week, we've seen a steady drop, with rates sliding to 7.51%—the lowest we've witnessed since September. While many people are eagerly anticipating rates to dip even further, the vital question is, will you be ready to seize the moment when it arrives?
For countless individuals, the answer might be uncertain. Waiting for rates to drop is one thing, but being fully prepared to dive into the market when it happens is an entirely different story. Most folks may not be ready or even know where to start. And although the trend shows a gradual decline in interest rates as of this week, we're not certain if we'll ever be back to the 2-4% rates we saw during the pandemic. But what if we were? Check out these telltale signs whether you're waiting for rates to drop, or preparing for it:
WAITING for Rates to Drop | PREPARING for Rates to Drop |
Occasionally hearing something about the rising/falling interest rate by chance online, at work, or by radio | Getting regular interest rate and market updates from your trusted Realtor so you know when it's time to GO |
Guessing how much your monthly rate would be based on online tools and guestimates that don't know your specific financial profile | Understanding how much of a mortgage you can (& want to!) qualify for with an official PreApproval through a certified loan officer who helps you understand your specific financial profile |
Checking out houses online that you have no idea if you could qualify for or not, and not knowing what to look out for in the listings because you've never owned a home before, or it's been a long time since you bought one | Knowing what houses are selling for in your neighborhood or area of interest and how that would work with your budget, all while your realtor and loan officer use their expertise to find potential red and green flags |
Not knowing what money goal you should aim for down payment and closing costs, so you just don't end up saving much at all and keeping all of your money in a low interest savings account or cash | Having a realistic savings goal for your down payment and closing costs, and using this "preparing" period to save up toward that goal in the meantime, especially in a High Yield Savings Account |
Not understanding what the actual process to purchase a house is and feeling overwhelmed with how much you have to learn and do once rates finally drop, and missing out on a home you could have gotten because another Buyer was more prepared! | Having a solid baseline understanding of what the escrow process is because your realtor walked you through the contract and standard timeline, and knowing that when you are ready to put in an offer, half the guesswork and stress will already be done and gone! |
So my questions to you is, are you waiting for rates to drop or are you preparing for it?
The Art of Preapproval - Your Readiness Passport
If you find yourself in the category of homebuyers who have been patiently waiting on the sidelines without a clear starting point, fear not. Whether you're taking your first steps into the realm of homeownership or you're an experienced homeowner aiming to broaden your real estate portfolio, the initial step is consistently the most crucial. While some might assume that the first move involves browsing their preferred real estate websites, this is a common misconception. The journey commences with something far more foundational—the pre-approval process, which acts as your definitive readiness credential.
What is a Preapproval?
A preapproval is your golden ticket in the world of real estate. It's a certification from a lender that you are financially qualified to secure a mortgage for a specific amount. Essentially, it's the green light that tells you, "You're ready."
Why Getting a Preapproval is Vital
Getting preapproved isn't just a formality; it's a strategic move. It's your financial roadmap in a world where mortgage rates can fluctuate unpredictably. Here's why it's indispensable:
Preparation is Key: A preapproval sets you up with a financial game plan. It helps you understand your budget, set realistic goals, and determine the type of property you can afford when rates finally take a dip.
Swift Action: In a market where timing is everything, a preapproval allows you to act swiftly. When rates make that awaited drop, you can immediately submit an offer without hesitation, giving you a competitive edge.
The Preapproval Process Unveiled So, how do you get preapproved? It's not as daunting as it may sound. The process involves having a candid conversation with a trusted loan officer who will thoroughly review three vital elements of your financial profile: income, assets, and debts.
Income Assessment: Your loan officer will assess your income sources and stability. For W-2 employees, they'll consider your employment history and how long you've been in your current role. Self-employed individuals will have their income evaluated based on averages of your annual tax returns.
Assets Evaluation: The assets examination centers on what you've saved. It includes the down payment, closing costs, and reserves. While coming in with a 20% down payment is ideal, you'll learn how less can be more (3-5% down or even 0% in certain areas) but may require Private Mortgage Insurance (PMI).
Debt Scrutiny: Your debts will be reviewed in detail, as they play a pivotal role in determining your readiness. The debt-to-income ratio, reflecting how debts stack up against your income, will be assessed. Additionally, your credit score will be pulled, influencing your interest rate and buying power.
Don't Wait - Prepare for the Rates to Drop
So, instead of playing the waiting game, why not proactively get ready for the impending drop in rates? It's time to take action and secure your position in the market by initiating a conversation with a seasoned loan officer. Understand your next steps, identify opportunities for improvement, and be ready to navigate the real estate landscape with a well-thought-out strategy.
Waiting for rates to drop is one thing, but being prepared to act decisively is everything. At Team Alaka'i, we're here to guide and educate. If you're looking for a trusted mortgage officer to help you prepare, reach out to our team, and we'll connect you with our network of experts. Don't just wait—prepare, strategize, and seize the moment when those rates drop. Your dream home might be closer than you think.
Comments