Goodbye bidding wars, skyrocketing home prices and rock-bottom interest rates. Today’s housing market looks very different from a year ago when tight housing inventory and pent-up demand pushed up home prices at an unsustainable pace.
Now, as rising mortgage rates scare off some potential homebuyers, “for sale” signs are becoming more plentiful and home prices are beginning to slip.
While a shifting housing market requires prospective buyers to think about their home search in a different way, it also presents new opportunities and advantages, says Mark Sargent, Zions Bank retail mortgage manager.
“Sometimes buyers become hyper-focused on interest rates and fail to consider the big picture,” Sargent says. “When you consider the different factors that impact your monthly payment, you can actually get a deal similar to what you would pay in a lower rate environment.
”Further, the housing landscape is transitioning from a seller’s market to a buyer’s market, giving would-be homebuyers more choices and negotiating power.
Sargent offers the following 5 advantages for homebuyers in today’s real estate market.
Homebuyer Advantage #1: Lower home prices mean less money down
The down payment to purchase a home – typically ranging from 3%-20% – is the biggest hurdle for many homebuyers. “Sinking home prices mean less money is needed upfront to buy the same type of home that might have sold for more six months or a year ago,” Sargent says. Additionally, it takes a smaller down payment to reach the 20% threshold required to avoid paying Private Mortgage Insurance or PMI.
Homebuyer Advantage #2: A better deal could offset a higher rate
The Boise, Salt Lake City and Provo-Orem metro areas were recently listed among the top 10 housing markets nationally that are cooling off the most. If you’re able to nab a home for $460,000 that would have been $500,000 six months ago, the significant price savings could partially or fully offset the higher interest rate. Not only would the principal portion of your payment be less, but interest would be calculated as a percentage of the lower loan amount.
Homebuyer Advantage #3: Negotiating power belongs to buyers
Less than a year ago, people were waging bidding wars on the scant housing inventory available. Now, as homes linger on the market longer, homebuyers have more to choose from and more ability to negotiate with the seller. “With more motivated sellers on the market, you have more room to be particular about the house you want, rather than settling for whatever comes available,” Sargent says.
Homebuyer Advantage #4: A refinance might be in your future
Whatever mortgage interest rate you lock in now won’t necessarily be the rate you have for the duration of your loan. If rates trend back down in the future, you may be able to refinance at a lower rate. Among its own mortgage clients, Zions Bank has seen historical loan durations of six years before they are refinanced.
Homebuyer Advantage #5: Some factors are in your control
Independent of housing market conditions, your credit score influences the mortgage rate you’re offered. Paying bills on time and building good credit can help you get the best rate possible. In addition, the type of mortgage loan you chose will impact your monthly payments and interest rate. Adjustable-rate mortgages, for example, tend to have lower introductory rates, while jumbo loans typically have higher interest rates.
When it comes to buying a house, mortgage professionals frequently advise: “Date the interest rate, marry the house.” Shopping for a competitive mortgage interest rate is one of many factors to consider in your home search. The Zions Bank mortgage loan calculator can help you calculate your monthly payment and compare loan scenarios.
Get answers to frequently asked questions and learn more about what to expect during the home loan process on the Zions Bank website or contact a Zions Bank mortgage loan officer for assistance.
Kallee Feuz is a public relations officer with Zions Bank.
