Kari McCoy's Real Estate Articles
CURRENT REAL ESTATE MARKET
The current real estate market is extremely competitive, and if you are ready to buy a new home, you must be prepared to use whatever financing route gets you to the negotiation table. In many areas, the most desirable properties make a fleeting appearance on the multiple listings and are snapped up by hungry buyers in less time than it takes to say, “Sold”. Buyers with creative financing options have an advantage.
In a very active market making the purchase offer contingent upon selling your existing home will increase the likelihood that the homeowner who can choose among multiple offers will sell the house to someone else (who most likely will not have the contingency of selling their current home first).
Once you decide to purchase a home, the wise step is to get pre-approved by a lender for a specified loan amount. If interest rates are inching upward, ask the lender to lock in the interest rate, points and other fixed costs of the loan for a long enough period of time to complete your purchase. Get the rate lock when you fill out the application in the form of a written agreement that states the initial lock date, lock period, lock cost and options to extend the lock.
When opting for million dollar properties, many buyers with cash tied up in high return investment accounts need ready options for financing large percentages of the mortgage. One option is the adjustable rate mortgage loan (ARM), which now offers rate caps limiting the amount the interest rate can increase in any given year and during the life of the loan. The ARM allows the borrower to avoid paying the premium associated with the higher interest rate on a 30 year fixed loan. If you suspect that you may decide to move in a few years an adjustable rate mortgage that is less expensive than a fixed rate mortgage and may be a good financing option.
Interest only loans come in a variety of packages that in general allow borrowers to pay only the interest on the loan for a designated period. The principal can be paid off at any time. Sometimes buyers with big yearly bonuses will pay an entire year’s interest up front. Another type of loan is the hybrid, which combines a 15 or 30 year fixed portion with an interest only portion. A pledged asset package allows affluent but temporarily cash poor borrowers to promise assets like mutual funds, CDs or a stock portfolio in place of a down payment.
A bridge loan is a strategy for purchasing a new property while you are in the process of selling your current residence. Using your existing home as collateral you may get a bridge loan for three months to five years to use as a down payment for your new home. When you sell the old home, you pay off that mortgage and the bridge loan. You can also apply for a second mortgage or equity loan to accomplish the same goal. Bridge loans are more expensive and your credit must be excellent to qualify.
Ask your Realtor for references. Be informed – talk with lenders and local real estate professionals.
Copyright© 2010 Kari McCoy
Kari McCoy is a resident of El Dorado Hills and owns the Kari McCoy Group, Residential Real Estate, at Coldwell Banker. Call her at (916) 933-KARI (5274), e-mail her at sold@karimccoygroup.com or visit www.KariMcCoyGroup.com.