When United Kingdom voters decided to leave the European Union, they started a domino effect that should make it easier to sell inherited property in faraway New Hampshire.
The ripples of instability the vote created sent nervous investors to U.S. Treasurys like a moth to a flame, and there is a discernable, albeit imperfect, relationship between 10-year Treasury rates and mortgage rates. U.S. Treasury rates are already down to 1.46 percent, which is about a tenth of a point lower than the pre-vote rate. By comparison, nine months ago, U.S. Treasurys traded at 2.27 percent. The Mortgage Bankers Association has already reported that 30-year fixed mortgages are at an average of 3.76 percent, and analysts expect the rate to drop to as low as 3.5 percent in the next several weeks. As a result, homeowners who have been unable to take advantage of prior low rates, perhaps because they had poor credit scores or underwater mortgages, are expected to drive up refinancing volume by as much as 40 percent this summer.
Economists expect that, to avoid further potential financial instability, the Fed will hold off on further interest rate hikes because of Brexit.
Money is a commodity like any other, and when it is cheap (i.e. when interest rates are low), potential buyers can acquire more money and hang on to more of what they have. While there is never a shortage of buyers, there is a big difference between a potential buyer and a qualified buyer. Current conditions make it easier for a realtor to identify buyers that are:
- Prequalified: “Prequalified” buyers are credit-worthy according to the bank’s financial parameters. If the buyers are “preapproved,” which means the bank has already agreed to loan a certain amount of money pending inspection and paperwork, that is even better.
- Liquid: Realtors can ensure that buyers have about 5 percent of the purchase price in cash for closing costs, and also verify that they either have a down payment or are prepared to buy mortgage insurance.
- Cash Flow Positive: As a rule of thumb, qualified buyers will spend no more than 28 percent of their monthly income on PITI (principal, interest, taxes and insurance) payments.
- Credit Worthy: There are several components here. First, qualified buyers have few blemishes and have proactively dealt with negative information. Second, qualified buyers are not overly leveraged with car loans, credit cards, and so on.
A realtor can verify that a buyer is qualified to purchase inherited property in Massachusetts, thus avoiding unpleasant surprises.
To learn about more ways a realtor can help, contact us today.