Category: MORTGAGE MARKET

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MORTGAGE MARKET

House Hunting Tips for First-Time Home Buyers

Our favorite house hunting tips will have you home in no time.

Spring has sprung, the flowers are in bloom, and the curbs are becoming more and more appealing by the day. Must mean it’s house hunting season. So, if you’re a first-time buyer, you’re going to want all the house hunting tips available to help snag your first home while fighting off all the other first-time buyers.

Don’t worry, with the right advice in hand, buying in a competitive market can be easier than you think. Conquer your homeownership goals with the following house hunting tips for first-time home buyers, curated by yours truly.

Tip #1: The right real estate agent can make all the difference.

When you’re ready to buy a house, it’s important to have the right people on your side. Friends and family members are a good start, and the right lender can help make sure you’re ready financially. But a real estate agent? A good agent makes all the difference. 

Consider this: A lot of people think of real estate agents as glorified tour guides. They unlock doors, they show you around, they answer questions, and that’s it…right? Wrong. 

A solid real estate agent (preferably a Realtor®—otherwise known as a certified agent who’s part of the National Association of Realtors) is half friend, half negotiator. They’re going to have your back through the home buying process, and they’ll spend much of their time scouring listings to find homes that fit your wants and needs. In fact, they’ll be able to search through listings you can’t even find on the most popular listing sites. Most importantly, they’re the ones who read through the contracts to make sure you’re getting a fair shake. 

Tip #2: Don’t get (too) attached.

House hunting can feel like a roller coaster of emotion, and you’re probably going to fall in love with a lot of homes. Our next house hunting tip? Don’t get too attached to what you see online or in person. Sure, the listing pictures may knock your socks off, but remember that those homes are often professionally staged. 

As for in-person viewings? Remember that any home you put an offer on should be professionally inspected anyway, because you never know what that fresh coat of paint is hiding and you may not have immediate access to things like attics and crawl spaces. Looks can be deceiving either way, so don’t forget that most of the homes you’re seeing are staged to sell—not staged for the realities of life. 

Most of the homes you’re seeing are staged to sell—not staged for the realities of life.

When starting out on this journey, the best thing you can do is come to terms with the notion that the first homes you look at probably won’t be the ones you buy. Use this as an opportunity to take notes on what you like and what you dislike, and compare other homes to that list. 

Tip #3: Waving the red flags.

When you do start attending open houses and scheduling private walkthroughs, there are are several factors to consider that might be so obvious. To sum up our next house hunting tip, here’s a short list of things to keep an eye (or a nose) out for:
  • Bad smells: These can be indicative of backed-up sewage lines, hidden mold, garbage, or pests. When it comes to funky odors, trust your gut. 
  • Humidity: If you can, get a humidity reading in basements and crawls, and keep an eye out for signs of moisture. Brown or yellow spots in the ceiling and bubbled wallpaper or drywall could indicate leaks in hidden areas.
  • Craftsmanship: Look closely at corners, edges, and lines to make sure everything lines up. Look for bows, cracks, jams, and scratches, as those could be signs of poor worksmanship. And don’t forget to make sure doors and drawers close correctly. 
  • Surroundings: People love to look at the home, but they often forget about the surroundings. Is the home located on a busy street? Near a church bell? Do the neighbors have dogs? We’d hate for first-time buyers to have buyer’s remorse because they forgot about the sights and sounds around the home.
  • Perspective: Online listings have a habit of making spaces seem larger than they actually are. Rooms that once looked huge online turn out to be little more than the size of a coat closet. Perspective is everything, so don’t let that wide-angle lens fool you. 

Tip #4: Do your homework.

Your agent is going to take you to see plenty of homes, but you should also take the initiative to see some homes on your own time. If not by attending open houses by yourself (or with your partner), then at least by (safely) staking things out during off-hours. What’s the traffic look like at 2:00 PM on a weekday? What’s it like at 10:00 PM on a Saturday night?

These kinds of impromptu visits to homes or neighborhoods you like on the surface can reveal far more than a typical house tour, and could help narrow your selection or eliminate some options entirely. Ultimately, the more you see, the better off you’ll be. 

Impromptu visits to homes or neighborhoods you like on the surface can reveal far more than a typical house tour, and could help narrow your selection or eliminate some options entirely.

Tip #5: Get pre-approved.

If, by chance, you do stumble upon your dream home at any point in the house hunting process, you’re going to want to put in an offer. 

These days, offers backed by a lender’s pre-approval carry more weight than your standard pre-qualification (which is nothing more than a statement saying what you might be able to afford). A pre-approval is a bonafide, verified review of your qualifications—your income and your credit score, for example. Plus, it tells sellers that you’re serious about moving forward. 

Tip #6: Patience, patience, patience.

They say it’s a virtue, but it’s also a totally necessary house hunting tip for first-time buyers. Impulsivity leads to mistakes, and mistakes lead to regrets. The process can be unpredictable and time-consuming, but your agent and your lender should help provide a smooth, seamless process that gets you to the closing table in no time and with no regrets.

And now that you know how to house hunt, you’re ready to start the next chapter of your life!

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MORTGAGE MARKET

Is It Better to Build or Buy a House?

The median sale price of a home in the United States has steadily risen over the past year. According to numbers from the Department of Housing and Urban Development, the average “sold” price topped $450,000. And while housing inventory has more than doubled since this time two years ago, interest rates for 30-year mortgages are currently hovering around 7%. 

Buying a house is an exciting thing, but it’s not surprising that many potential buyers might be considering alternative options. One question coming up quite a bit? “In this market, is it better to build or buy a house?”

Things to consider

Before you decide if it’s better to build or buy a house, think about the following three things:

BudgetInventoryLocation
How much money do you have saved for a down payment? For closing costs? For furnishings? What can you reasonably afford? What’s your “no-go” number?Are there a lot of houses for sale near you? How many have your desired amenities? How many check all your boxes? Are you not finding anything you’re really loving?Are schools important to you? Do you need to be within walking distance of your favorite restaurant? What will your commute look like? How close or far will you be from your family?

Regardless of your path forward, these three factors will play a vital role in your decision. Why? Because building a house is generally more expensive than buying an existing one. Because you may not need to build a house if an existing one checks your boxes. Because building one may require you moving well out of town. 

Trying to figure out if you should build or buy is like a “choose your own adventure” game. You may feel confident in one answer, but it may lead you down a road you weren’t expecting.

Buying your home

Unless you’ve got a giant bag of cash, your purchase will involve a detailed process. We’ve covered the process before in other blogs, but here’s a quick refresher: pre-qualifcation, pre-approval, making an offer, going through underwriting, closing. There are sub-steps built into each of those steps, but that’s the gist. 

Because it’s so well-documented and regulated, if you prepare accordingly, it’s a relatively pain-free process…especially when you work with Cardinal Financial. Hey, have you gotten your free rate quote yet?

It might be better because…

Buying is more common than building because, let’s be honest, there are so many homes already built. Building may come with the ability to pick and choose every little detail, but many buyers don’t have the time or money for the process of building. And, beyond that, buying an existing home comes with its own set of pros:

  • In many cases, these homes are move-in ready. That’s good for people on a tight schedule.
  • Because it’s the standard, there are more loans available for buying existing homes.
  • Thanks to those loans and other factors, it’s often generally cheaper to buy.

One con to consider? Depending on the market, you may face stiff competition from other prospective buyers.

Building your home

Just like buying isn’t as simple as throwing down a bag of cash, building isn’t as simple as buying a truckload of 2x4s and pouring some concrete. Unless you’re paying all cash for the construction, you’re going to need a loan—not just for the construction and the labor, but for the land itself.

One-time close loans are a convenient option that allow you to pay for the land and labor with one package. Otherwise, you’ll be looking at two separate mortgages for the land and the construction itself. That means two applications, two underwriting processes, and two closings. Never mind the two payments part of it. 

The process of building a home is also a lot more involved than simply buying one. Here’s a quick look at it:

  1. Buying the lot
  2. Get the plans
  3. Hire a team
  4. Obtain permits
  5. Start construction
  6. Continue construction
  7. Inspections, inspections, inspections
  8. Closing
It might be better because…

While building a house might be a little (or a lot) more complicated than buying a house, it comes with its own set of benefits. For starters, what’s not to love about whole-home customization? We’re talking location, layout, lighting, flooring, fixture finishes, equipment…everything. With that customization, you get access to new options for energy efficiency, meaning your new construction home can help you save on bills while saving a little bit of the environment. And, because you’re building from the ground up, you face little to no competition. 

Downside? The COVID-19 pandemic continues to have lasting impacts on the industry, meaning lead times are longer and materials are more expensive. Now, speaking of expenses…

The cost of building

Details vary, but Architectural Digest reports that building a house can cost anywhere from $500 to $1,000 per square foot depending on location. Meanwhile, American Home Shield’s 2022 American Home Size Index shows that the average size of a house in the United States is roughly 2,500 square feet. 

Crunching the numbers shows us that building a house that size can cost anywhere from $1.2 to $2.5 million—averaging out to $1.875 million. 

If that number caused your jaw to drop, take this bit of solace: Other resources pin the average cost of a custom, similarly sized home at roughly $500,000—just a little north of the average “sold” price of a home in 2022. 

What’s it all come down to? When building a house, your location, equipment, and finishing touches will push your costs up or down. The safe bet is to budget for more than you initially expected, or were quoted for.

Oh, and don’t forget the taxes

Regardless of whether you choose to build a house or buy one, please remember one thing: Property taxes. You’re going to pay them either way, but property taxes on new construction and custom homes are often higher than those for existing homes—even remodeled ones. Again, it’ll come down to your budget, and your budget should include estimates for property taxes. 

And hey, if you choose to borrow from Cardinal Financial, we’ll help you prepare those estimates either way.

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MORTGAGE MARKET

School District Impact on Property Values and Home Prices

Did you know? School district impact on property values can influence home prices and home buying trends.

It’s back-to-school season and we can’t think of a better way to get into school spirit than by discussing the importance of looking for good school districts during the home buying process.

The fact of the matter is that many buyers don’t even know school districts should factor into their decision, but they absolutely should. School quality is an integral part of a neighborhood, with a substantial impact on home prices and property values. So, where do we start?

The importance of a good school district

You might be surprised to learn that, when it comes to value, it’s not all about the ratio of bed to bath or square footage. With or without children, lots of buyers intentionally choose to buy homes in quality school districts. For some, it’s because they want a good education within walking distance for current or future children. For others, a good school district can be a sign of a healthy local economy and real estate value.

In 2017, the National Association of Realtors (NAR) found that nearly one quarter of buyers considered the quality of local schools when house hunting. Of course, families rarely stay put forever. Jobs change, children grow up, and when it comes time to sell, people want to know their home has retained or increased in value. Realtor.com found homes in higher-performing districts received 26% more views than the average listing. Even more surprising? Those homes were 42% more popular than homes in lower-ranked districts, which brings us to our next point…

School district impact on home prices

Many factors play into home prices, and a school district’s quality is just one of them. On one hand, sellers understand that a good district is more desirable, so they might use it as leverage for higher asking prices. On the other hand, if you’re a buyer and a good school district is one of your must-haves, you might be willing to bid higher to snag the right home. On average, people were willing to pay $50 more per square foot for a home in top-ranking school districts compared to homes in average districts, according to Redfin.

Other buyers might also be willing to trade some of their “wants” if it means securing a spot in a top district. After all, what’s more important: your bonus-room-turned-craft station, or a dependable school district with all the resources a child could need?

Even for buyers who aren’t parents yet, it’s something worth thinking about. Either way, it’s a trade off and it’ll come down to what you value most. And speaking of value…

School district impact on property values

Higher home prices and higher test scores often mean higher property values. Higher property values usually equate to higher property taxes, a portion of which tend to trickle down to local school districts. In a roundabout way, this is why higher-quality schools with higher test scores tend to be located in more affluent areas: more funding from the community.

Some sources even suggest that properties in better school districts hold up during various crises. Take the past housing crisis, for example. One study from Ken Corsini of BiggerPockets found that, between 2006 and 2009, “properties near schools with a rating of four or five stars were almost completely insulated from declining values, while those near schools with one to three stars experienced massive losses in value.”

That tells us that a neighborhood’s equity can serve as a buffer during challenging market conditions.

Not the most important factor

Children or not, every buyer should take the school district into consideration. But that doesn’t mean it needs to be your top priority. The right home for you is the one that feels right at the time. When that day comes, you can count on us to help you get there faster.

A good rule of thumb to keep in mind when you’re home shopping: wherever you buy, you’re buying into the local school district.

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MORTGAGE MARKET

Multiple Offers on a House? Here’s How to Choose the Best One

Buying a new home often involves selling your current one. And in this market, that likely means you’ll receive multiple offers from potential buyers. So, if you receive multiple offers on a house, shouldn’t you just choose the highest one? Not necessarily. Mortgages can never take the easy way, can they? That’s where we come in. Let’s dive into all the key factors to consider when choosing the best offer on a house.

7 factors to consider when you receive multiple offers on a house.

  • How many contingency clauses are there?
  • How is the buyer planning to pay for it?
  • If the buyer is paying via mortgage, what type?
  • Is the buyer pre-approved?
  • Can the buyer cover the difference if the appraisal comes back low?
  • Can the buyer accommodate your move-out schedule?
  • How much earnest money did the buyer put down?

How many contingency clauses are there?

Contingency clauses are conditions that let buyers back out of the deal if they aren’t met. Since these conditions are intended to lower the buyer’s risk, as a seller you’ll generally want to favor offers with fewer contingencies. Some common contingency clauses to look for include:

  • Buyer has to sell their current home before buying yours
  • Buyer can walk away if the appraisal comes back lower than expected
  • Buyer can request necessary home repairs to be taken care of before purchasing

How is the buyer planning to pay for it?

If your buyer is offering to pay in cash, this could be an incentive for you to favor that offer over one that hinges on a mortgage. Cash offers save you (and the buyer) a lot of time and paperwork. On the other hand, cash offers typically won’t be the highest you receive. If security is a priority for you though, it might still be the best fit. Keep in mind that you may not receive any cash offers, as the average buyer simply doesn’t have that much money readily available.

If the buyer is paying via mortgage, what type?

While cash is great, most offers on your home will likely entail a mortgage. The heavy lifting for their home loan falls largely on the buyer, but some loan types may be easier for you to deal with than others. For example, government-backed mortgages like FHA and USDA loans could potentially take longer to process than Conventional loans. Not ideal if you’re in a hurry to move out.

Pro-Tip: Learn more about the different types of mortgages your buyers may have here.

Is the buyer pre-approved?

In a competitive market, a pre-approval letter from your buyer is more of a need than a want. Pre-approval essentially lets you know that if you accept their offer, the buyer has financing lined up. But if everyone is pre-approved, how does it help you make your decision? This is where your own research comes in. In addition to how much the buyer is pre-approved for, you should also look into who they’re pre-approved with. Not all mortgage lenders are created equal (we would know).

Can the buyer cover the difference if the appraisal comes back low?

Gap happens. If the appraisal (an objective estimate of the home’s value in the current market) comes back lower than the offer you’re considering, that difference typically won’t be covered by the buyer’s mortgage. In other words, before you accept an offer with an appraisal gap, make sure the buyer can make up the difference.

Pro-Tip: If you find yourself on the other side of an appraisal gap, try these strategies to close it.

Can the buyer accommodate your move-out schedule?

Whether you’re looking to move out ASAP or you need more time before handing over the keys, an offer that works with your schedule will make the process that much easier. Just remember that, like most decisions in life, the date you and your buyer both agree on will probably entail some compromise. After all, your schedule isn’t the only one in flux.

How much earnest money did the buyer put down?

A buyer’s earnest money deposit is typically 1-3% of the purchase price. In a competitive market, you might receive offers with higher deposits to sweeten the deal. The purpose of earnest money is to give you, the seller, confidence in the buyer’s ability to meet the conditions of the purchase agreement. This generally means that more earnest money is better, as you get to walk away with that amount even if the deal doesn’t go through.

Any other tips for handling multiple offers on a house?

This isn’t an exhaustive list of factors to consider when selling your home, but it should help you narrow down your priorities to choose the offer that best meets your needs. In some cases, you may also want to ask:

  • Is the buyer willing to pay for/handle repair requests?
  • Is the buyer willing to pay your closing costs?
  • Why is the buyer interested in your house? If your home has a lot of sentimental value, it may be important to know it’s being passed on to someone who will care for it as much as you do. Just be prepared for most honest answers to be “I need a place to live” and “it’s in my budget.”

In the midst of answering all these questions, don’t forget to pause, breathe, and remind yourself that out of multiple offers on a house, the best is ultimately the one you feel most comfortable with. You’ve got this!

Choosing the best offer on your house might be more complicated than you think. We’re here to uncomplicate it.

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MORTGAGE MARKET

Pre-Qualification vs. Pre-Approval: Which is Better?

You know those eye-catching envelopes you find stuffed in your mailbox? The ones that claim you’ve been “pre-qualified” or “pre-approved” for a new credit card or car loan? If you’ve been shopping for home loans, you’ve likely noticed those same terms floating around.

As if buying a home wasn’t daunting enough without needing a dictionary to define the differences between the two, some mortgage professionals use the terms interchangeably. We’re here to help eliminate as much confusion as possible. So, let’s break down pre-qualification vs. pre-approval so you can bid on that dream home with confidence.

The basics of pre-qualification vs. pre-approval.

Think of pre-qualification vs. pre-approval as circles in a Venn diagram. The two terms are closely related, but represent separate steps in the home buying process.

According to the Consumer Financial Protection Bureau (CFPB), both options are statements from a lender estimating how much you might be able to borrow.

Fast Facts:

  • Pre-qualification: When you submit basic information to get a rough budget for your home purchase.
  • Pre-approval: When a lender completes a full review of your information (credit score, income, assets, etc.) and extends a preliminary loan offer. In a competitive housing market, a pre-approval can really give you an edge over other buyers.

Prepping for Pre-Qualification

Pre-qualification is a solid first step in your home buying process. It’s ideal for establishing a general budget and price range for homes, and typically requires answers to questions about income, employment, and debts.

Pre-Qualification Pro-Tip: Your pre-qualification isn’t an official loan offer and is only as accurate as the information you provide. Artificially inflating your income won’t help much when it’s time to apply for your loan. Estimate your mortgage amount and monthly payments with our free mortgage calculator.

Pursuing Pre-Approvals

Think of pre-qualification as a surface-level look at your information. Pre-approval, on the other hand, requires actual documentation and a deeper review by an underwriter before generating a conditional* offer that’s (usually) good for 60 days.

For a pre-approval, your lender reviews your W-2s, pay stubs, tax returns, and more to estimate a loan amount. Pre-approval is ideal if you’ve started your home search, partnered with a real estate agent, and are actively searching for a loan.

*The lender will confirm your financial documents, loan terms, and other conditions before the final approval.

Pre-Approval Pro-Tip: You may be pre-approved to borrow more money than you need or more than you’re comfortable spending on a home. Be mindful of your budget and don’t feel pressured to take the full amount. We recommend limiting your search to homes within a comfortable price range—something only you can decide.

Which One Is Right for You?

Now that you know the key differences between pre-qualification and pre-approval, it’s time to start thinking about which option best suits your needs. Ask yourself: How far along are you in the journey of homeownership? Are you just looking around, or are you ready to talk numbers? Our handy table below can point you in the right direction.

 Pre-qualificationPre-approval
Where are you in the process?Searching around to find out how much you might be able to borrow.You’ve found your dream 
house and you’re ready to 
make an offer.
What are you willing to provide?Basic details 
(i.e. income and employment)		Proof of income, assets and other financial details.

How to handle a pre-qual curveball

While you may receive pre-qualification from a lender, that doesn’t mean you’re approved to borrow that loan amount. Pre-qualifications are a general estimate of your home loan eligibility. Pre-approvals dig a lot deeper, but neither are final home loan approvals.

In some cases, lenders may provide pre-qualifications and pre-approvals for less than what you expected. Alternatively, lenders may not extend either of those options at all. If that happens, don’t panic. These decisions aren’t made lightly, but there are steps you can take to prepare for next time.

  • Contact the lender to find out why you weren’t approved for a certain loan amount or why you were denied an offer outright. Was your credit score too low? Have certain accounts gone delinquent? Is your debt-to-income ratio too high? Knowledge is power, and the right lending partner will help you identify areas of improvement.
  • Ask the lender for a copy of the credit score they used or take the time to request your own report. If your pre-approval was denied, lenders are required to provide a notice containing the credit score they used to make the decision and instructions on how to obtain a free copy of your credit report.

So, ready to get pre-approved for your mortgage?

That wraps up today’s lesson! Now that you know the ins-and-outs of pre-qualification vs. pre-approval, it’s time to make the next move. Are you ready to start looking at homes? Do you already have one in mind? No matter where you are in the process, our team can help.

Now that you know the key differences between pre-qualifications and pre-approvals, it’s time to start thinking about which option best suits your needs.