Real Estate For Atlanta Blog

As an agent in the trenches daily, I am often exposed to the most up to the minute data that can help me predict where I think the local housing market is headed in the near future. For example, when I see more hits on my web site, it is usually a good leading indicator that more buyers are out there with an interest in buying homes. The opposite is also true. What I’ve noticed lately has been rather surprising. 

Lately it seems like we were finally getting to a point where buyers were realizing that this is the opportunity to buy and perhaps the fence is not the correct place to be. Just as the traffic started to increase on my listings and web site, speculative announcements began to circulate in the media about potential upcoming legislation that is designed to stimulate the housing market. Buyers who were just about ready to write offers on properties began to put things on hold. Afterall, who wants to buy now when they are told that they might be able to get 4% interest rates or a $15,000 tax credit if they wait another month. The pre-announcement of this possible legislation has actually had the opposite effect on the market as it was designed to do.

I think that getting closure on what the stimulus bill(s) are going to be is more powerful than the bills themselves. Now that we seem to have gotten some closure on this, I am hopeful that this will begin to get things moving once again. The worst thing the government can do right now is announce possible legislation that might come to fruition as this will once again make everyone put everything on hold. I also believe that the currently approved legislation has too long of a timeline on it. What we need is legislation that will take buyers off the fence today - not by the end of the year.

It has become common practice for builders to offer incentives such as $2,500 towards the buyer’s closing costs IF the buyer uses the preferred lender. New laws which take effect on January 16th will limit the ability for builders to continue this practice.

The new laws will require that any incentive that is being paid for by the builder be offered to everyone regardless of what lender they use. Of course, it is quite possible that the preferred lender may still be the best choice for a buyer of new construction. Firstly, since they are getting many new clients from a particular subdivision, they may be able to still offer rates that others can not beat. Also, it is possible that using the preferred lender can lead to a smoother, quicker, and easier closing and possibly slightly more lenient loan qualification requirements. It is still advisable to shop for the best loan; but consider the preferred lender as one of your options and let them compete for your business.

I am often asked by my clients how to compare lenders. What interest rate they should expect to get in today’s market, what reasonable fees are, etc. While I am not a lender myself and I am not officially qualified to give advice on loans, I am in the industry and have seen hundreds of buyers go through the loan process and this is my advice:

When comparing lenders, I’d ask for what is called a Good Faith Estimate. Ignore the estimated amounts for attorney fees and 3rd party fees since these will be the same regardless of who you do your loan with and they are merely estimates. Look at the interest rate combined with the fees that the lender is charging you including the origination fee to see what your best deal is.

The origination fee is all part of the package. The more origination you pay, the lower interest rate you should get. For example, the lender I was going to use for my own refinance will often say he can do x% with 1% origination or a slightly higher percentage, y% with a .5% origination, etc. Basically, the lender makes their money either on the markup on interest rate or fees they charge. It’s like a pay now or pay later choice.

Which is better will partly be determined by how long you plan on staying in your home with that loan. If you’re going to be in for a long time, it’s often best to go with the lowest possible rate even if you have to pay some extra fees. If you think you might be moving in a few years, then it’s usually better to get the slightly higher rate with lower fees.

Also, rates are so volatile now that they are literally changing mid-day; so when comparing lenders, make sure to do so rapidly within the same day so you know you are comparing today’s rates.

I think your credit score does have something to do with what rate/fee structure you can qualify for; but I am honestly not sure what the formula is for that.

One final not, there is more to a lender than just the lowest rate and fee structure - especially on a home purchase (not as important on a refinance). You need to find a lender who has good customer service, organizational skills, and communication skills to get the job done smoothly and keep you informed of any complications that may come up. I have several top-notch lenders that I work with on a regular basis that I’d be happy to recommend for any of my clients.