Despite the financial market churnings recently, I’m seeing and hearing from others I talk to in real estate that the home buying season is heating up…now. We’re seeing a high volume of buyer activity. I’ve been receiving lots of borrower inquiries and doing pre-qualifications. I don’t have any data to back this up quite yet, but my hunch is that between the end of the Holiday Season, the signing of the tax reform bill, and the fact that January begins the season home buyers start shopping, all indications are that the housing market will be brisk this year.
So, I’m advising my clients – and you – that now is the time to begin the mortgage process if you are planning to purchase this year. Yes, rates have been steadily creeping higher and we don’t see them going down much more, which makes now a better time than later to lock in a good interest rate.
Also, loan guidelines on many popular programs are changing, offering more options for non-QM borrowers, or borrowers with non-traditional circumstances such as:
Bankruptcy – if you’ve had a bankruptcy you may think you have to wait years before you can apply for a mortgage. However, there are new loan programs available that don’t require such long wait times and give us some more options to explore.
Self-employed – If you are self-employed, you know that it can often be hard to document your income because you report it differently than traditionally employed borrowers. There are some new programs to help you qualify that will accept stated income and other means of documenting income, like using bank statements.
And…a new financing strategy to win a Bidding War
Now, for my favorite strategy for you if you want to win the bidding war for the house of your dreams. In the industry it’s called delayed financing. If you have lots of assets, like in a retirement account for instance, you can use that cash for an all-cash real estate transaction and then after you’ve purchased the home we can do a delayed financing mortgage on the home and you get the proceeds. Typically, mortgage loan programs require the borrower to wait 6 months before being able to do a cash-out refinance.
Here’s an example of how I’ve used this strategy recently for a client. Her current home is for sale but has not yet sold. She found her new home and wanted to buy with all cash in order to win a possible bidding war. She has retirement savings of $750K, plenty to buy the home with, so she cashed out enough of her retirement savings to buy the new home with cash. We did a delayed financing mortgage for her and she paid back her 401K with the proceeds.
Delayed financing is also a great strategy for residential real estate investors because it allows you to purchase and close on properties quickly without the longer closing timelines required for traditional mortgage loans.
So, if this is the year for you to purchase your next home, I’d recommend getting started now, while rates are favorable and there’s less competition among home buyers. Give me a call, I’m happy to chat with you about your options.