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By Emilio DiSpirito IV, Realtor, Team Leader of DiSpirito Team and co-owner of Engel & Völkers East Greenwich and Barrington East Bay – contributing writer
The real estate market has peaked in Rhode Island and the housing market is showing signs of change. After a bullish run and unexpected turn of events with historically low mortgage rates and the highest real estate appreciation of all time, the market needed to lose steam, at some point!
Since early March 2022, 30-year fixed mortgage rates have increased from approximately 3.8% to near 6.9% for consumers with less than perfect credit, in the recent week. Residential mortgage rates have reached the highest level in nearly 12 years. Foot traffic for private showings and open houses has slowed significantly and there are roughly 40% more single family homes on the market today, in late April 2022, than compared to early March 2022.
According to Larry Kendal, author of “Ninja Selling”, “for every 1% increase in mortgage rates, your buying power will decrease by approximately 10%”. With this information, taken into consideration, over the course of just over one month, buyers have lost about 30% in buying power and consumer confidence has been shaken.
When purchasing a home, buyers can connect with a realtor who can provide them access to homes offering “assumable mortgages”. According to Ivestopedia.com, “buyers who wish to assume a mortgage from a seller must meet specific requirements and receive approval from the agency sponsoring the mortgage. Investopedia further states that loans covered under this program are Federal Housing Authority (FHA), Veterans Affairs (VA) and the U.S. Department of Agriculture (USDA).
So, how does an assumable loan work? What are the benefits? A buyer can assume the interest rate that the home seller currently holds for the balance owed, when under the qualified programs. A buyer will have to pay out of pocket or take a second mortgage out on the remaining equitable balance that the seller is aiming to get.
Right now, is an opportune time for buyers to take advantage of these programs, because over the past 8 years, rates have been historically low in the 2’s, 3’s and 4’s. This allows a buyer to recoup buying power for the same monthly payment to get a larger home vs. an inferior home and location at the current rates. When taking this into consideration, we can see why this is very palatable to buyers and sellers alike.
“Assumable loans can allow for consumers to take over VA (veteran affairs) mortgages, even when the buyer has no military work history”, according to Matt Bates of Movement Mortgage. Matt went on to say that there are certain approval steps that need to be made and the VA must approve that specific buyer for the loan to close. VA loans carry no private mortgage insurance and oftentimes boast the best residential mortgage rates. Borrowers are encouraged to understand all of the details and seek professional guidance, according to Bates.
The good news is that sellers who also have to buy congruently are in a position where they can sell at an all-time high price point, take their cash out, place a substantial down payment on their next home and use a program like FHA, VA or USDA loans, when possible, to assume the low mortgage rate of the current homeowner.
For more information, please contact your local Realtor or email Emilio DiSpirito at Emilio.firstname.lastname@example.org for guidance.
To read more articles in RINewsToday by Emilio, go to: https://rinewstoday.com/emilio-dispirito/
If you would have asked me what I wanted to be growing up, little Emilio would have told you “an archeologist” or “an architect” despite the fact that at age 8 I had my first lemonade stand, landscaping business and was recording my first “news show” on my boombox! Well, I never was much good at trigonometry and did could not see myself traveling for months and possibly years at a time, so becoming an architect or archaeologist clearly did not happen!
Fast forward 26 years later and I’m running a team of the finest residential real estate professionals, own a media company and host my very own radio news show about real estate!
For 7 years straight it seemed that I had put in more hours than the day had to give on my real estate business. 7 days a week, 14 to 16 hour days, without a break! Why? My friends and family did not understand the sheer magnitude of moving parts and services we offer to our clients during a transaction! One slip up or one missed call could mean make or break for someone’s dream home or even a lost deposit!
Running a team of like-minded, highly qualified and capable professionals has allowed me to offer a very streamlined, simplified and efficient approach to the sales process for our clients and allowed me to earn personal time again with my family while not missing a beat for my clients!
When I’m not working, I’m with family and friends, riding my mountain bike, eating at local restaurants, enjoying live entertainment, hiking, skiing or reading!