100: Tips and Tools for Buying a Home Despite Rising Interest Rates

Since, for nearly everyone, a home mortgage represents the biggest — and most important — loan of all, rising interest rates have made home buying more of a challenge. But if you happen to be a prospective homeowner, that’s no reason to give up. The connection between the Fed raising interest rates and experiencing more pain in your wallet when you apply for a home loan is often misunderstood — the relationship isn’t quite as direct as you might expect. And while you can’t help but notice that home loan rates are higher than they were just a few months back, from a historical perspective, they’re still pretty low. More importantly, there’s some upside to the recent shifts in the home loan market that you might not have already considered.

Sound more encouraging? Then join us for our milestone 100th episode of Absolute Trust Talk as we speak to Janice Nugent, a certified mortgage planning specialist with Compass Mortgage Advisors. With more than 15 years of experience in this capacity, Janice is not only well-qualified to weigh in on current home loan market conditions, but during that time, she’s also made it a priority to help her clients build wealth, financial freedom and pursue their life goals by leveraging intelligent mortgage, cash flow, and home equity strategies.

Janice has forged her career by looking out for her client’s best interests — not only in the present, but farther down the road. She takes a well-rounded, holistic approach to her role and encourages her clients to look at a home loan purchase not just in terms of shelter or as an investment, but also in terms of how a pending purchase will affect other facets of their lives. She’ll provide a fresh perspective on home ownership — whether for a primary residence or investment purposes — and give you a logic-based overview of the home loan market as it currently stands, as well as the opportunities that still exist for prospective home buyers. In this episode, we’re going to discuss:

  • The advantages of working with a mortgage broker versus working directly with a bank
  • How the Fed’s rate hikes affect mortgage interest rates — HINT: There’s not as direct a connection as you might think
  • The factors that home loan rates are actually tied to
  • Why prospective home buyers need to consider how a home purchase will affect their life goals
  • Some seldom discussed but very beneficial by-products of the recent home loan interest rate hikes

And more.

If you’ve been considering buying a home for some time — whether as a primary residence or as an investment — but now feel like the recent interest rate hikes have dashed your hopes of pursuing the American Dream, this episode will have you reconsidering your assumptions. Janice will discuss some programs you might be able to use to bring home ownership back within reach and explain why changes in the real estate market actually create some upside — especially for first-time buyers.

Big Three from Episode #100:

  1. While the Fed’s recent actions have affected home loan rates, they haven’t had a profound an effect as the media might lead you to believe. Sure, there’s a connection between Fed hikes and home loan rates, but it’s not the 1:1 cause-and-effect relationship that you might have believed, and, when viewed from a historical perspective, home loan rates are still relatively low. Want proof? Ask your parents or older relatives what their home loan cost them!
  2. Higher interest rates mean it costs more to borrow, but a countervailing force is now at play. It’s no longer a seller’s market. Only a few months ago, a seller could put their home on the market with an inflated asking price and still get multiple offers — with plenty of overbids. Now, not only are more houses on the market to choose from, but because they’re not being pursued as feverishly, they’re staying on the market longer, causing sellers to become more motivated. Institutional buyers are starting to lose interest, which also has an often-profound effect on home affordability.
  3. Buying a home will almost always be the most expensive — and important — purchase you will ever make. Because of the tax advantages of home ownership, it can be an excellent investment, but it shouldn’t be considered solely for investment potential. Janice will explain her process to ensure that a pending purchase not only opens the door to the American Dream but will also fit into the overall scheme of your life plans.

Time-stamped Show Notes:

0:00 Introduction
1:01 We’re pleased to welcome Janice to the show and share a little more about her background to get things started.

3:24 This is now the most common question potential home buyers have about borrowing money.

3:53 Here’s why an effective loan broker needs to develop relationships with a variety of lenders.

4:44 While Janice is licensed to work in California, she shares insights about an exception that can allow her to assist home buyers in other areas.

5:31 Here’s another question that many people – and not just home buyers – want answered: How does a rise in the federal funds rate affect mortgage interest rates?

6:31 While the Fed’s rate hikes have a mostly indirect effect on home loan rates, this is the prime mover that impacts rates.

7:20 Start listening now as Kirsten and Janice talk about the factors that affect a first-time home buyer’s decision.

8:20 Because most home buyers consider their purchase an investment, Janice first looks at affordability with clients to better understand how she can best serve them.

10:12 A first-time home buyer’s tax situation can change significantly. Here’s how Janice makes sure that’s taken into proper account.

11:05 The tax breaks that come with homeownership are undoubtedly appealing, but here’s another very important consideration that Janice highlights with borrowers.

12:14 Okay, let’s get back to the elephant in the room – what’s happening today with prices in this rising interest rate market?

12:35 Sure, interest rates have gone up, but here’s a positive byproduct of that.

13:40 When would-be home sellers stick to inflated asking prices, this often happens.

15:00 Think that interest rates are now at or near historical highs? Janice shares some more perspective to help see past the number shock.

16:32 There are a number of programs – some of which are little-known – that Janice can use to help prospective home buyers. Currently, the buy down program is one that works really well for both buyers and sellers.

19:15 Not long ago, people were knocking on doors offering well above the asking price. Now that it has changed, sellers have some strategic choices to make.

19:55 As an alternative to accepting a lower price for their home, some sellers have chosen this approach, but it’s certainly not for everyone.

20:17 Next, Kirsten and Janice talk about some “Fanny and Freddy” type programs that can also help make things easier for today’s home buyers.

22:30 Because of recent changes in the real estate market, some people are now considering an investment in real estate. Here’s how it differs from the residential market.

24:53 Yes, becoming a real estate investor may sound like a good idea, but just remember you’re becoming a business owner. Listen in as Kirsten and Janice highlight a couple of things you need to remember, especially when it comes to taxes.

26:15 Q&A: With interest rates rising somewhat rapidly, are people still able to get pre-approved for a loan?

27:40 Q&A: ARMs were once a staple of the lending market but fell out of favor when interest rates dropped to historical lows. Here’s how appealing they are now. HINT: It usually signals some economic black clouds up ahead.

29:25 This home equity statistic will almost certainly surprise you, but it may also lessen the chances of a future real estate crash. 

Get in Touch with Janice Nugent
Janice Nugent
Compass Mortgage Advisors
3840 Blackhawk Road, Suite 105
Danville, CA 94506
M: 925-683-0787
W: 925-208-1755

Resources/Links Mentioned in this Episode:

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