Even with the health of the NJ Real Estate market which has much improved this year, thanks to a better labor market and the end of the foreclosure crisis, the situation isn’t as good for the NJ Home Buyer. The number of people looking for homes is outpacing the growth in inventory of both new and existing homes. This is causing “bidding wars”. In April 2015, the number one complaint we have been hearing in home buying from home buyers was “winning the biding of an affordable home that meets their needs”. Usually because the next person or buyer is willing to bid the ask price or more than the ask price to get the house and they were pre-approved for their mortgage to buy at that price or higher.
To offset this rapid growth in the Real Estate Market the Federal Reserve Bank increases the price of borrowing money to keep things in check so to speak. Or to avoid too much growth too rapidly which we know from experience that rapid growth causes a market to bubble and possibly crash or result in a significant drop in the overall Real Estate market’s health for the long term.
Mortgage rates have remained low since the housing crisis of 2008, but we have been warning consumers since the end of 2014 that rates would go up in 2015. Fixed-rate mortgages are now 30 to 40 basis points higher than the lows for the past year. But “I told you so” doesn’t help someone trying to determine what to do. If you are looking to buy a home, I suggest, you do not wait or price haggle too much over smaller sums of money such as 5000-10,000 dollars because you may lose more money than that over 30 years of mortgage payments when rates continue to rise.
If you have to pay $100 more per month for your mortgage you will lose 36,000.00 dollars over 30 years of payments and that can be the result of waiting from the low interest rates of last year until later this year and choosing not to buy because of a 5000-10,000 difference between buyer and seller reaching an agreement.
Also look for homes where you can afford to bid or buy at the ask price if necessary because seller’s are now getting used to getting close to their ask price and in some cases over the ask price. Do not make the assumption that you will be able to get them to come down by 10%. Those days are long gone unless a house is grossly overpriced to begin with and in which case your Professional Realtor should advise you of such a scenario.
Let’s break this down to give you a better understanding. A basis point is 0.01 percentage point. That may sound confusing, but it’s an easy way to discuss the difference between two rates. For example, if the rate for a certain type of mortgage was 3.50%, and it went up to 3.75%, the difference would be 25 basis points.
The financial math is pretty straightforward: A higher mortgage rate will increase the monthly payment when all other factors remain the same. An increase of 10 basis points (0.10) in an interest rate adds 1.2% to the monthly payment. And a higher payment will affect qualification ratios, potentially limiting what you can buy.
Typically interest rates can rise by 25 to 50 basis points each time the Fed meets quarterly. Resulting in a higher mortgage payment. A higher payment affects qualifying ratios.
My advice is simple.1.) Do not wait to buy. Rates can rise while you are waiting. 2.) Less price haggling. The money you think you are saving you may actually lose more long term. 3.) Shop till you drop. I don’t mean houses. Shop banks, rates and lenders who compete for your business. Use a Mortgage Broker and you should start this process before you look at houses. This way you will know what price range you are looking in.
Be sure to shop around for the best possible mortgage at the best possible rate with your own personal qualifications taken into consideration. However, that being said you probably should not do this alone. The best way to do this is to use a Professional Mortgage Broker. He/She will do the shopping for you and bring you the best banks, lenders and rates that you qualify for. Let the broker do the work for you.
In our area I recommend using Mortgage Master http://www.mortgagemaster.com to many of my clients. Mortgage rates are very personal and very local. The rate you end up with is a function of the market overall, local market conditions, the type of property, the type of mortgage, and the financial profile and credit history of the borrower. Let the professional do the work for you and usually he/she is compensated at closing from the bank. There are other companies to choose from I just happen to currently use and like using Mortgage Master. And no, they do not pay me to say this.
There will be even higher rates by the end of the year, so what you’ve seen in recent days is likely just the beginning. By knowing your options and staying informed, you can still take advantage of what are still considered very low mortgage rates.
The opinions expressed here within are my own completely independent of BHGRE Coccia Realty and its owners and subsidiaries.
If you have any questions or wish to meet me for a Real Estate consultation please contact me as my information is below.
__ “Sell Your Home Today With Ray!”
Raymond Ciampaglia, Realtor®
Email : ray@
Realtor Profile: http://njray.realtor
Better Homes and Gardens Real Estate | Coccia Realty
424 Valley Brook Ave | Lyndhurst, NJ 07071
Office: (201)939-8900 | Fax: (201)939-8910
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