Focus on the house, not as much on the rate

By Bill Golden

?You may have heard the old adage, Date the rate; marry the house. I’ve increasingly invoked that these last few months when talking with potential buyers who are frightened by current mortgage rates.

The general thought is that a home should in most cases be a long-term investment, but “the average mortgage is only kept seven years or less, so it may be your forever home, just not your forever rate,” according to Carol Lynn Upshaw, a veteran loan originator with Hyperion Mortgage.

Longtime closing attorney David A. Rahall, Rahall & Associates, offers the perspective that, “interest rates are (actually) fairly normal now; they are still historically low. They were artificially lower for a time due to the COVID crisis and other factors. People got spoiled and now see more typical rates as being high. Buy now, it's an opportunity.”

?Many factors + perspective

?Upshaw emphasizes that there are so many factors that go into purchasing a home, rate is just one of them. “Don’t ignore other aspects of your loan or of the overall purchase, and only look at rate,” she says. “If because of this shift in the market you end up paying more in rate but pay less for the property, it kind of evens out.”

?“’Higher rates’ are not a good reason to miss out on a good house,” Upshaw says. “The difference in the monthly payment is not as substantial as you may think. Not to mention there are new (lending) products that enable a buyer to have a lower start rate (2-1 buydown), or possibly look at adjustable rate mortgages (5/7/10 year arms) especially if refinancing is a very good possibility.”

Veteran banker Amy Ellis of Hyperion Bank concurs regarding the relative normalcy of rate, saying we have seen rates much, much higher, though that scenario may be unfamiliar to younger buyers who have not lived through it.

“Atlanta is experiencing job growth and has so much to offer along with a modest cost of living,” Ellis says. “Add to that that rents are high and rising, so, if you are making a move and can afford the down payment, take the opportunity to get established and build equity in a home rather than paying rent that will likely be the same amount or higher monthly. “

Other things to consider

Both Ellis and Upshaw mentioned that a recent increase in the jumbo mortgage limit will help, as will mortgage programs with lower down payment options. A jumbo loan, BTW, is a conventional loan that exceeds conforming limits set by FHFA, Fannie Mae and Freddie Mac. Currently, mortgages above $726,200 (in most areas) are jumbo; higher-cost areas have a higher conforming loan limit.

“I believe we will see all of this level out later in 2023, and hopefully end up in a more comfortable range (for most consumers),” Upshaw says. “There are always going to be first-time home buyers because homeownership is still ‘The American Dream’ and to some degree the rate is what it is when you are ready to buy. I know the first-time home-buying process can seem daunting – but a great loan originator will help you choose a product that minimizes that and can definitely make the process smoother.”

She adds: “After doing this for 30 years, I can say we have been here before – I believe my parents paid 18% for one of their mortgages – we know most rate increases are relative, and that they eventually come back down. And, if you need to, re-fi when rates are back down.”

The outlook, for now

For a time, it seemed that rate increases may have slowed things down a bit, but the spring market in Atlanta is gearing up to be quite robust. We’re seeing multiple offers on most properties, and we continue to have more buyer demand than we do inventory. As the spring market continues, this is only going to increase, so now is definitely a good time to buy.

And we all agree: The economy and consumer perception of the economy are certainly factors in home buying and home financing, particularly in terms of what consumers feel comfortable committing to.

Likewise, no matter the rate, a great way to get ahead of the curve when buying a home – especially in a hot market like we are still seeing in Metro Atlanta and many other places – is to get pre-approved before home shopping and definitely before making an offer. It streamlines the process, helps you set realistic expectations and shows sellers that you are prepared and serious.

If you need to buy now, don’t let the rate stop you

Yes, every home-buying scenario is different, but in general, I would encourage most potential home buyers not to get overly focused on the rate. That’s just one of many factors to consider before you marry the house.

?

Bill Golden, a full-time Realtor for 30+ years, is with Keller William Realty Intown Atlanta. He represents buyers & sellers in intown Atlanta neighborhoods, including LaVista Park, where he has lived since 1996. Bill serves on the board of PALS Atlanta (Pets Are Loving Support), which helps people facing critical illness keep their beloved pets at home.?