Sometimes it's not just the features, price, and location that sell a house. Sometimes, it's the mortgage payment. And that's not always dictated by sales price alone. Let me explain.
The amount of interest paid as part of every monthly mortgage payment is what is really limiting buyers right now. When the interest portion of the payment is less, buyers have more money available in their monthly mortgage payment budget to allocate toward the actual price of the house.
This is why as rates go up, finding the right home gets more difficult, and prices stagnate or fall. Buyers just aren't willing to let interest eat up such a large portion of their budget, so sellers have to compensate. What really determines whether a buyer can (or will) buy a house or not is the interest rate, not the sales price.
I think in today's real estate market, we need to shift our focus from finding the right house to finding the right loan. Then we can find the right house.
Financing has always been an important consideration in the home buying process, but it is more important now than ever. It can be the difference between a buyer getting a house they will enjoy for years to come, or a house they settle on for now and want to sell the moment they move in.
What few buyers (and agents, really) understand is that every bank has different loan products, programs, requirements, rates, terms, etc. Mortgages are not one-size-fits-all, and the products available change ALL. THE. TIME.
One of my listings went under contract this week, and the one thing that made a difference aside from the marketing and positioning of the property was the financing terms available to buyers.
This particular listing was in a neighborhood targeted by a portfolio loan program offered by a bank. In other words, this loan program could only be used on a select few properties, and my listing was one of them. When I found out about the program, I knew it would sell the house. The interest rate was 3 percentage points lower than the average market rate! This would save buyers $605 EVERY MONTH in their mortgage payment.
I provided a mortgage calculator right here on this page (look down below this article on your phone, or to the right margin on your computer), so you can see for yourself: Use a sales price of $325,000, with a 5% down payment, so the loan amount is $308,750. Use the market rate of 7.99% to see the payment, then the special portfolio program rate of 4.99%. See the difference!
Whether you're buying or selling, financing is the key to making most deals work, especially in today's market. But it's not just about going to your bank and getting qualified. Ask your agent about special programs and opportunities that are available that the big banks don't offer. Invest time in finding as many financing options as you can, and you'll have more houses to choose from.
If you're selling, ask your agent about special financing programs that can make your house more affordable than your competitors. You will likely get more money from the sale, and depending on your situation, it could mean the difference between selling and not selling at all.