Finding a Home and a Mortgage

By: Darren Melstad

As many of us have been hearing in the news lately, there is a shortage of houses to pick from in almost all regions of the country, including the Sioux Falls area. In many price ranges, not only is there a shortage of properties to choose from, but those same properties are often seeing multiple offers. It’s also not unusual to see offers coming in higher than the listing price.

That being said, it is even more important than ever for potential buyers to be fully pre-approved by their lender before entering the market.  By being pre-approved, you are showing the potential seller that you have met with a lender and that your lender has verified your credit, income and assets. This is a step further than just being pre-qualified and could give you the edge over another buyer, or buyers, you may be competing with.

While we may be in what’s called a “seller’s market,” it’s important to understand that it is also a “buyer’s market” in that interest rates have remained at or near historically low levels. After the presidential election, interest rates started picking up and were headed in the direction that many experts thought they would go. But contrary to that forecast, rates have started to slide back to pre-election levels.

To put it in perspective, if a certain buyer was pre-approved for a $200,000, 30-year mortgage at 3.875 percent interest, that buyer would only qualify for a $190,000 mortgage at 4.25 percent interest. So, not only have house prices risen but so has the amount someone can qualify for due to lower rates.

It’s a great time for a buyer to be in the housing market because of low interest rates. But, make sure you do your homework first. Choose a lender carefully and let a mortgage professional help you navigate through all your options. It’s important to know what loan program is best for you such as 15 and 30 year conventional loans, adjustable rate mortgages, FHA or VA. 

Some lenders also have attractive in-house programs for buyers that might be in unique situations that do not allow them to qualify for secondary market loans. For specific questions check with your preferred lender and make sure you are ready to “move” when your dream home hits the market.

Darren Melstad is a mortgage banker with Security National Bank in Sioux Falls.