The Double Comma Club

Are you looking to purchase a home today, but wish you could have gotten a lower rate on your loan? Well, what if I were to tell you that even though market rates today are hovering around 7%, you can still purchase a home with a 3.5% interest rate or even lower intrigued? Stick around as I go through how that's a very real possibility for today's buyers. I want to quickly answer these top four questions I get asked all the time. Listen for the details and how an assumable loan can benefit buyers and sellers. 

What is an assumable loan?

Is the contract written differently?

How do you know a house has an assumable loan and how do you find them?

And then how do you actually acquire it?

Example:

If I'm a buyer and I bought a house 10 years ago, and at that time I bought that house for $300,000, I put no money down, I got a VA loan and I got a fantastic interest rate. Whatever that rate was, we'll call it 3%. So I got a $300,000 loan, a 3% with a VA loan, no money down. Now, fast forward 10 years. Now I'm a seller, and as a seller, I have a loan and I want to sell that home for $500,000. And I had this original loan at $300,000. I paid it down for the last 10 years. So maybe today it has a balance of $250,000. That $250,000 still has an interest rate tied to it at 3%, and I still have 20 years left on my loan. As a seller, I then have the option to market an assumable loan, meaning a buyer has the option to purchase my home, keeping that loan intact.

Now, if I want to sell that home for $500,000 and my loan is $250,000, that implies that the buyer has to either get a loan for the difference, has to have the cash for the difference, and that's something that we're going to talk about when we talk about how to acquire the loan. But the basics of an assumable loan is the terms around that loan stay in place. They simply get transferred from the current seller to the new would-be buyer.

The cost of borrowing of a business, borrowing funds is still going up trying to slow down the spending that Americans and businesses are doing to inflict pain, right? We talked about this, that the Fed is trying to inflict pain. The Fed is trying to slow the roll to just slow down demand, slow down buying and allow supply chains to catch back up again.

The cost of everything is just not going to drop like a rock, but it's going to slowly get there where the cost of the things that we experience at the gas station, at the grocery store are going to start coming back to Earth, right? So let me point out a couple things.

So the cost of shipping; shippers have already said that they expect to realize a benefit in lower costs early 2023. So we're seeing these indexes that some of the things that's costing them, like the cost of gas is less? Some of their expenses are less. They're expecting that cost to then be passed on to the wholesalers, which will be measured in the PPI early 2023. Again, nothing happens overnight, but check out this drop. We saw 4.9% drop month-over-month, which dropped the annual percentage from 21% in September to 11% in October. Now that's a big drop given where we had been because we had seen it much higher than that, even upwards of 21%. So to see that kind of annual growth coming down tells you that the shippers are going to start passing on lower costs to the producers and the wholesalers and those wholesalers.

We saw the PPI came out this morning and it dropped from an 8.4% annualized to an 8% annualized. It was expected to come out at 8.3%. The month-over-month was only 0.2% and that was expected to be 0.4%. So all of that is showing that the annual is coming down because the month-over-month increase is slowing down. So the shipping is costing a little bit less. The cost of shipping, of getting the products from the ports to the fact or to the warehouses. That shipping cost is costing less. The wholesalers, their cost of goods, their cost of acquiring that product to then turn into the consumer based product. So that wholesale price is coming down. We saw on Thursday's report, the CPI came down, it was expected to have a month over month of double what it actually had.

The value and the equity that we have in our homes is abundant, even if it comes down slightly based on our expectation of our equity over the last two years.

We are still strong in equity. We're strong in savings. Many of us, many  us still have jobs. There's still job openings. GDP is expected to be positive this fourth quarter, which says that the economy is still churning and people are still buying all of these things way towards a strong economy, which is where I'm going to land. This plane also lands to a very strong real estate market.

Listen to this full episode. The summary is That's it. That's what it comes down to is the balance of supply and demand.  

Let's walk through how you can actually buy down your interest rate! You can save hundreds, if not thousands of dollars by buying down your interest rate. But, there are some limitations to how much seller concessions you can receive, based on your loan and down payment. Let's also walk through the numbers of buying down your interest rate.

Today we're talking about a permanent buy down or really even any kind of seller concession and a limitation on the amount that you can get in order to buy that rate down. For conventional loans, whether you're buying it as a primary home or a second home, we're going talk about investments. With a primary home or second home, it depends on how much money you're putting down. So when you are putting down less, you can get less of a seller credit to help give you that rate. Buy down advantage. Let's talk through some of those numbers.

Listen to this 5 minute episode of The Double Comma Club, "Can I Buy Down My Interest Rate?"

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What does a first time home buyer today have that they haven't had for the last two years and might not have next year? The benefits of being a first-time homebuyer in today's real estate market are PLENTIFUL. In this episode I talk about some first-time homebuyer loan programs and opportunities to take advantage of... including getting a lower interest rate! Buyers today can still get a great deal!

Let's go through the loan programs first, then the opportunities.

Veterans you have by far, the best loan program on the planet, the VA loan with zero down the low interest rates. No mortgage insurance is by far the most stellar opportunity to get into a home. If you are a veteran, you should be exercising that option right now because you haven't had it for the last two years because it was so intense.

The USDA is the way for the non-veteran to get in with zero money down. Now, you're going to have an upfront fee, but the monthly mortgage insurance is lower than any other program. So the USDA loan is a fabulous program to bring families out to rural areas to buy single family homes with no money down.

Down Payment Assistance. This is a tool that has been underutilized for the last several years, and the reason why is because sellers weren't accepting it. They didn't have to. Buyers were coming in with cash or 20%, 30%, 50% down. Sellers were looking for conventional or a cash buyer with more money. Down. Down payment assistance is for those home buyers looking to expand their opportunity to financial wealth and health through real estate. It is an opportunity to get in when you might not otherwise do so. Now, I will say with a word of caution, if you are using a down payment assistance program and putting no money down or the USDA or the VA, and we see slight pullback still on our home values when you buy a home, it could be that the value of that home goes down slightly before it picks back up again. You can buy a two, three, or four unit property as long as you're going to live in one of the units with as little as 5% down if your income is less than 80% of the area median income. 

A Freddie Mac loan. In the Denver market, it got very hard to qualify based on the income requirement, the 80%. So we would look for those underserved areas and we would purchase multi units in those areas. Well, Freddie Mac did away with focusing on or excluding those areas from the income requirements, and they just said, You have to fall within the income requirements.

To hear the rest of the options and opportunities, listen to this episode of The Double Comma Club, "First-Time Homebuyer Advantages in Today's Market."

As we continue to see FED rate increases to slow the economy, we are starting to feel the fear, and it all comes with a price. The price is fear, instability, and job loss. Which in turn creates volatility as markets react to economic reports without the stabilization of a Federal Reserve buying mortgaged-backed securities and treasuries. But, I want to break housing down into four buckets this month: supply, demand, affordability, and credit availability.

The housing sector is strong, well-funded and able to withstand short-term volatility. While critics continue to generate fear around instability, crisis, bubbles, foreclosures, and more, our job as real estate professionals is simply to support reality with facts. Listen to your DMAR November Denver Real Estate Market Update! 

Nicole has had a lot of conversations with first-time home buyers making assumptions that aren't correct. So that's what we're talking about today. She is busting eight home-buying myths. Nicole goes through the myth, misplaced logic, and the truth about home buying. There are a couple of them that may really surprise you about being debt-free before you buy, and shopping for the lowest rate to determine your lender. Listen to this episode of The Double Comma Club, "Eight Home Buying Myths."

1. You must put 20% down to buy a home.

2. It's cheaper to rent than to buy.

3. It's cheaper to buy a fixer-upper.

4. You need to be debt-free to purchase a home.

5. All lenders are the same.

6. You should go with the lowest rate.

7. Spring is the best time to buy.

8. Find the home before applying for the loan.

what is a seller concession? I mean, that's kinda like a dinosaur these days. I haven't seen one of those in several years. So a seller concession is when they agree to provide funds that support the buyer during the transaction. You can bump into a seller concession several times throughout the transaction. Usually, it's in the beginning. A buyer might use a negotiating tactic that says, I'll pay full price, but I'm gonna ask the seller to pay for all of my closing costs and my prepaids allowing me to come to the table with less cash down. They might also negotiate a price reduction in addition to a seller concession.

Those are two separate items and can be used in conjunction or separate from one another. A seller concession can also show up during the inspection period where you might choose to not have something fixed, but inline, get money back from the seller again towards prepaids and closing costs or a price reduction. So there's sometimes a conversation right now about a two one buy down or a rate reduction, and that might be a seller concession. I wanna double click on that because a seller concession can only be used towards a fires prepaids and closing costs. There are limits to what a seller can provide, both per the loan that the buyer uses.

Learn why it's exciting for buyers for the return of seller concessions in this episode of The Double Comma Club, "What Are Seller Concessions?"

It depends on who you are and what your goals are and what your finances look like. And that's always the case. I mean, there was in 2021, it wasn't the right time for some people to buy. They just couldn't compete. And so it's really, right now, if you still have the baseline motivations, you want a home for your family, you need to be in a specific school district. You don't wanna be moving your kids every couple of years if your lease is up on your rental and you maybe can't be in the same school district. You wanna have a sense of community, you wanna have a sense of safety. You need home offices and backyards and you have a dog that digs holes and you just can't get a rental.

And when you are at a point and you're ready to buy a house, you just deal with the market that exists when you're ready. And that market is different all the time. And we all like to think we can time the market and I'm gonna buy at the bottom. Well, when you buy at the bottom, it looks like this where we have high interest rates and market volatility and nobody likes that either. So there's always nuances to what that market looks like and how it impacts each person differently.

Listen as Nicole's guest, Amanda Snitker weighs the variations of how this market is affecting people depending on wherre they are in their current lifestyle and needs. 

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Find Amanda here: https://amandasnitker.com/

About Amanda:

Amanda Snitker has been a Colorado resident for more than 20 years and has lived in the Denver metro area since 2002. She has enjoyed living in the Baker Historic Neighborhood while owning a home built in the early 1900s. Amanda is a third-generation realtor and grew up with a father as a general residential contractor these relationships and knowledge have allowed her to live the Colorado lifestyle, offering credibility and expertise for the process of buying and selling homes to help her clients achieve their dream living experience.

I want to talk about interest. I want to make this all about what's going on with the fear around interest rates. When are they going to come back down? That's a huge question right now, and I'm bringing it up because I'm getting asked that a lot.

I was on a Market Trends committee meeting yesterday with DMAR and that also became a debate, whether it was going to be eight months or 24 months from now before we see some sort of drop in interest rates. We have experts on Housing Wire and on Fannie Mae, Freddie Mac and NAR, all confessing some predictions about interest rates.

The Federal Reserve has a single mandate at this time. They are typically a two-mandate agency working on the things that people purchase, the price that people purchase things at, which is really inflation controlling the price that Americans pay for the products they buy. And then the second thing is providing a space where those people who want to work can find jobs. This is keeping unemployment low and keeping inflation low. Right now we've got a lot of wage inflation, which is driving up our overall inflation, our core inflation if you will. We've got headline and we've got core, and I'm really talking and focusing on core because headline right now is coming down because gasoline is coming down, but core is staying strong. So as I'm looking at interest rates over the next two to three quarters, I'm really watching employment, specifically unemployment, because when unemployment starts to go up, the feds measure right now, their target is 4.4.

Headline inflation一commonly known as the CPI一includes more volatile food and energy price data, whereas the core inflation index excludes it. Headline inflation is better, but core is concerning.

There are still core components to inflation that are holding on. The biggest one is wages. The Fed wants to calm wages, they want people lose their jobs and go get another job for less money. They want people to stay unemployed for a short period of time to stop spending. They need demand and supply to come back in check that is going to control inflation and allow it to drop back down again, which is going to help our bonds and our interest rates. It hinges on employment.

I still believe that we're not in a recession yet. We're seeing manufacturing slowing down. We're seeing unemployment that went the wrong way. Unemployment has to go up all the things. That is why I think we're going to see interest rates dip at the end of next spring.

Listen to the full episode for more details on this logic and insight from Nicole in this episode of The Double Comma Club, "Focus On the Payment, Our Economy Works In Cycles."

Listen to this 4-minute episode with 3 quick tips on how to get rid of your mortgage insurance. It depends on the type of loan, and the current value of your home. But this episode is filled with good news in "3 Ways to Get Rid of Your Mortgage Insurance."

1. Call your servicer to talk about what you just heard in this epsiode.

2. If you can't reach them, reach out to Nicole Rueth at The Rueth Team