With Popular Bank’s Home Loan Originator Phillip Robles

Homebuyers looking to make a purchase in 2020 can anticipate competitive financing opportunities and an even more competitive housing market.

As low interest rates and appealing mortgage products encourage market enthusiasm, affordable inventory for first-time and upper mid-range homebuyers remains scarce. Buyers navigating this high-demand ecosystem can expect properties to move quickly and bidding wars to drive prices. According to the S&P CoreLogic Case-Shiller Home Price Indices, year-over-year prices will likely experience growth consistent with 2019’s 3.3% increase.

While the buzz around affordability continues, buyers will face additional concerns this year amid the market uptick. Sellers are looking for buyer confidence, and their preferences are becoming more rigorous. Many are prioritizing cash-heavy sales, expedited closings and offers without mortgage contingencies.

In other words, 2020 is the Year of the Prepared Home Buyer.

To be successful, potential buyers need to be ready to navigate high competition, nuanced seller criteria, and financing opportunities.

Tip 1: Meet with a mortgage professional or financial advisor to ensure buyer preparation.

As mentioned above, seller expectations are high. Buyers can navigate these demands by receiving mortgage pre-approval before starting negotiations. These documents show buyer confidence, financial stability and likely, an easier path to homeownership.

Meeting with your mortgage professional and financial advisor should be any buyers first stop on the path to homeownership. This won’t just start the process of receiving a mortgage pre-approval, it will help the buyer to gain comprehensive understanding of their financial health, as they become briefed on important home buying components such as Mortgage FICO scores and asset verification and declaration. This is also the time to identify financial snags that could delay or interfere with your mortgage approval and rate.

A mortgage pre-approval will help to steer a home search, build a budget and provide a perspective on financial health. Many homebuyers make the mistake of finding a property before knowing their mortgage credentials or comprehensive financial health, leaving room for unwanted surprises, aggravation and delays. In a competitive bidding environment, a mistake like this could easily cost a buyer their dream home.

Tip 2: Look for financing options that are more affordable and diverse.  

According to Kiplinger, mortgage rates will most likely remain stable and below 4.0% in 2020. These rates aren’t just attracting homebuyer interest, they’re creating financing opportunities that may not have previously existed.  While the 30-year fixed rate mortgage remains the go-to product, 15-, 10-, and 7-year mortgages are increasingly sustainable options. Buyers will do well to become familiar with these products to pursue financing that will work best for them.

Timing will also be key when it comes to getting the best deal. While rates are expected to remain stable, they are incrementally fluctuating more frequently. This can potentially translate to thousands of dollars over the life of a loan. It’s also important to note that while rate fluctuations remain minor for now, industry experts are largely estimating an uptick for the third and fourth quarter of this year. This speculation is fueled by both unknown economic variables and widely anticipated global events, including our very own election season.

While there’s no crystal ball to definitively tell us which way rates are moving throughout 2020, they are, in fact, moving. Buyers need to pay close attention to their mortgage pre-approval to understand rate lock terms, extension prices, and if there are opportunities to renegotiate should a better rate become available.

Tip 3: Remember that not all property types are created (or evaluated) equal.

Neighborhoods throughout New York City are seeing a boom in new condo and coop development, sparking heightened buyer interest. These properties can be appealing, but buyers should be ready to understand unique financing and buying considerations that come with them.

Many of these new buildings are mixed use – meaning they have commercial and residential space. This may be a store or parking garage, but condo hotels are also an emerging trend to watch for. These buildings may pose a challenge to buyers seeking financing. While buyers shouldn’t shy away from these units, they should prepare for a longer underwriting process and additional hurdles to overcome.

Whether a building is new construction or not, buyers should always closely review a building’s financials with their home buying team. Many coop and condo buildings have a strong financial background, but others do not. Some lack an emergency fund or even worse, are running financial deficits. These financial burdens could be passed on to unit owners in the form of future assessments or even cause the building to go bankrupt, turning a dream home into a nightmare.

As a final consideration, buyers pursuing coops should be ready to seek board approval. Coop boards are involved and may require additional financial information or have different requirements from that of your mortgage provider which can slow or completely disqualify a sale.

Phillip Robles is a Home Loan Originator with Popular Bank’s mortgage services division working with clients throughout the greater Metro New York area including New York City, West Chester, Long Island, New Jersey and Connecticut, as well as South Florida. NMLS# 150559