Sort out your financing options before starting to look for homes.
One of the things we’ve noticed entering the summer market is changes in buyer financing. Financing has always been an important part of the home-buying process. With high interest rates, some buyers need to work harder or budget more tightly to get their numbers right, and make sure everything aligns for their home purchase.
Additionally, as more buyers enter the market this summer, there’s a need to get your financing in order before you start looking at homes. Mainly because you don’t want to look at properties that you can’t buy, and if you find one that you want to buy, starting the financing process late could delay you or cost you the house.
Sometimes, buyers are surprised when they talk to a lender, thinking that they’re pre-approved or able to afford a certain amount, only to find out that they qualify for far less or more than anticipated. In this case, lenders help explain why they gave those numbers.
“Buyers are surprised when they talk to a lender thinking that they’re pre-approved or able to afford a certain amount.”
We are also seeing some challenges with HOA master insurance policies affecting buyers’ ability to secure financing. This is important for some conventional buyers and many FHA buyers — 90% of buyers who are using loans backed by Fannie Mae and Freddie Mac. Fannie and Freddie have certain regulations and specifications for insurance policies on associations for the loans they will avail. For example, Fannie and Freddie often deny loans if an HOA has modified their insurance policies to keep costs down.
HOA boards naturally want to keep fees low for homeowners. However, insurance costs are rising, especially for townhome communities that need complicated insurance coverage. While HOAs try to save money on insurance, sometimes, the cheaper policies don’t meet the standards required by mortgage lenders. This can create problems when homeowners try to sell their properties or when buyers try to get loans.
As buyers or real estate professionals, we sometimes don’t see these issues until a lender starts looking into their master policy. If you’re on a townhome association board, this is something to consider for your homeowners and their ability to sell their homes.
We will be sharing more information related to financing but for now, let us tell you that the market is still moving along. If you have any questions, please reach out to us at (952) 212-3597. Let us know how we can help.
