Get Pre-Approved Before You Start Looking

The feds did it again. This past week, the US federal funds rate was raised another 25 basis points, up a total of 4.75% since the start of 2022. The average for a 30-year fixed-rate mortgage doubled from lows in early January 2022 to almost 6.4% at year’s end, according to Freddie Mac.

When the Federal Reserve raises interest rates to control inflation, mortgage rates go up in response. And when people have a hard time finding a dozen eggs reasonably priced, saving or looking for a home gets pushed lower on the priority list.

As of this writing, the average interest rate for a 30-yr fixed mortgage is 6.85%  – That’s compared to below 3% as recently as the 2020-2021 Covid-19 scare, 

This all leads to fewer mortgage applications and increased putting off of refinancing current loans. Higher rates also increase risk for banks and mortgage companies that buy mortgage loans from other lenders.

Maybe now is the time to buy or sell your home or business; economic timing doesn’t enter into the decision to get into the real estate market. Most people can’t or don’t decide to shop for a home without necessarily needing to also shop for a mortgage.

Applying for a mortgage before you start your search for real estate serves a few excellent purposes.  

  • Know what you can afford. The interest rate landscape is in flux. Your comfortable monthly payment can provide you with a max of a $250k mortgage today, while the same payment two years ago might have given you the ability to go as high as $300k. Don’t throw out your plans yet, though. That $250 mortgage is likely to get you “more house” than it would in a low-interest-rate market (properties are likely priced lower). Knowing your budget before you begin looking or at least looking in earnest keeps your search on-track.
  • Lock in a rate before it goes up. If you lock in a preapproval for a mortgage, you’ve protected yourself from a higher rate of interest when closing time comes around.
  • Be ready to make an offer! Central Coast Realty agents are always looking to develop win-win agreements. One of the most difficult aspects of being a buyer’s agent is watching while that (nearly) perfect home or property goes under contract before our buyer has been pre-approved for a mortgage. By taking the time to research mortgage options (Your Central Coast Realtor can help you with this!) and lock in a pre-approval, you’ll be prepared to make an offer at the price AND time that’s right for you.

Central Coast Realty’s family of agents offer combined years of experience in everything Real Estate.

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