It’s a great time to buy a home, and here’s why

As interest rate hikes have halted and the U.S. economy has cooled, potential home buyers have been slow to buy homes. However, Thomas Eller, vice president and senior mortgage loan officer at Raleigh’s North State Bank, says it’s a great time for buyers to take advantage of the less-frenzied market.

A slower market comes with many advantages, he said, particularly in the Triangle, which will continue to experience exponential growth for years to come. Here’s the advice Eller offers to potential buyers who aren’t sure if they should move to a new home now.  

Eller explained that typically, as rates lower, prices increase. “The lower the rates go, the more house people can afford,” he said. “It’s almost as sure as a law of economics that when rates fall meaningfully, then prices will continue to escalate.”

He noted that sellers are able to increase the asking price on a home because demand is higher. “[They are] going to use that to their advantage to try and increase prices across the board,” he said. “The national average for a 30-year mortgage is 7.35 percent right now. If rates come down to six-and-a-half, I don’t think we’re going to see a huge price point increase. But as rates continue to fall, from a cost-basis standpoint, you’re better off getting a house now with a little bit of a discount refinance later. You don’t run the risk of paying a higher price point but a lower rate down the road.”

Eller said one of the great things about the current market is the ability it gives buyers to consider the options that are best for their needs. “When there are 20 people looking at a home, you don’t have time to talk about budget,” he explained. “You have time to spit out a pre-approval letter, and they know what rates are going to be. Now we’re having conversations with people about what expectations are for a payment based on the resources they have available.”

Eller said with more time and deeper conversations, buyers can consider the right price point for their needs, which is a great place for him to start making recommendations for their payment options. “The problem isn’t qualifying people,” he said. “It’s building a payment that can fit the budget. We want to do that before we waste anybody’s time on going through an approval. We want to make sure that they can afford it.”

One of the main goals Eller said he has as a mortgage lender is to make sure sellers have the right expectations going into a home purchase. “Align with a lender that is not necessarily trying to slam an approval through but is also cognizant of your budget from the very first conversation,” he said. “A good lender is going to ask them about their budget first and foremost. Our primary goal (at North State Bank) is to make sure that we are working with customers that understand what today’s mortgage payments are yielding and getting them comfortable with that.”

Eller said he walks through scenarios with potential buyers to get a better understanding of their financial picture. “We’ll have somebody call and say, ‘I want to sell and buy. I’ve got a 3.5 percent mortgage rate. I’m going to have X amount of this and equity. I want to buy at this price point using that equity and I need my mortgage payment to be X amount of dollars,’” he explained. “I’m getting that information before I’m even getting their pre-approval information because I want to make sure that their expectations are aligning with what the market will bear for that type of product. Otherwise, there’s no point for us to go through and pull credit if their expectations on what your needs are just not aligned with the product they’re looking at.”

One of the great benefits of buying in the current market is the numerous programs that are available for buyers. “Whether you’re buying a resale or a new home there are probably going to be some sort of incentives that you can negotiate,” Eller said. The first-time home buyer programs are for down payment assistance products or low-down payment products where customers can bring their own money.

In addition, Eller said many builders are offering incentives on their homes. He explained he had a customer who didn’t want to pay more than $2,500 per month for a mortgage, but their payment was going to be $3,000. “With the incentives offered by myself and the builder, we were able to do a two-year temporary buydown (on their mortgage rate), and that would get them below their target budget for the first two years. Instead of me spitting out an approval, I’m telling them on the phone right then and there, ‘Hey, assuming everything checks out on your pre-approval, we are going to be able to hit that monthly budget for at least two years,’ and give them a preliminary look about what they’re going to see from me.”

Eller offered simple advice to anyone considering buying in the current market. “Formulate a budget based on what your capabilities are with current income, current expenses, and have that ready. Someone that comes in and says, ‘My budget is $2,500,’ then I can work with that. We’re going to do everything we can to get it down to that point. But if we’re close to that, it gives us the ability to be able to set expectations upfront.”

Be sure to work with a lender like Eller and North State Bank as well as a highly qualified real estate agent who can help you get into the right home for your budget.