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Getting a Mortgage – How Low Interest Rates and Low Inventory Impact Your Equestrian Property Dreams

With budding trees and chirping birds comes the emergence of horse properties onto the real estate market. I love the excitement of preparing listings for sale and watching new listings come on that are the perfect fit for our buyers.

We have seen consecutive years of steady growth in home values. Interest rates have remained low and are currently at historic lows. Home inventory is tight, causing sellers to worry they won’t find the right home to purchase, keeping potential listings off the market. Equestrian properties and hobby farms are already a smaller portion of the inventory and sellers and buyers feel the extra squeeze in these market conditions.

Most of us don’t have the ability to pay cash for our dream horse property, so a mortgage is a necessity. Low interest rates present an opportunity. I reached out to Jeremey Beck of Caliber Home Loans to talk about how they can be best utilized.

When it comes time to get approved for a mortgage, what things will the lender consider?

There are four primary details. We call these the 4 C’s of credit:

Credit – The lender will heavily consider the buyer’s credit score and history. There are many free online soft-pull (won’t affect credit score) options for getting a snapshot credit report. It’s good to look at that before speaking with a lender, but a reputable lender will be willing to help set a buyer on the right track for credit repair, if needed.

Capacity – What is the buyer’s income? How is it made? Banks want to verify two years of income history and will expect two years of tax returns.

Capital – What assets are available to the buyer? Numerous banks offer 0% down loans. Regardless of the down payment, assets will always help in qualifying for a loan.

Collateral – What value does the property hold if the buyer defaults on the loan? Banks have minimum health, safety and structural standards for properties. Banks are hesitant to lend on a home that has major issues. They will rely on the appraiser to call out any pertinent defects. A competent Realtor can give candid feedback while viewing the property. In some instances, the buyer must work with the Realtor, lender and seller to address needed repairs prior to closing escrow.

Pacific Northwest real estate is experiencing some unusual conditions. What things do you see impacting the market in the coming year?

The PNW economy is on fire, boasting one of the strongest, most diversified economies in the nation. Interest rates are at all-time lows. Lower rates mean lower payments, and less interest paid over the life of the loan. Borrowers will see significant payment reductions compared to 2018 and 2019, affording them more buying power. Equestrian properties that may have been out of a buyer’s reach last year, may now be attainable.

Because of the low interest rates, current homeowners will refinance and reinvest in their current homes. This is a good time to look at equity in an equestrian property to see if refinancing would provide the capital to make desired improvements.

Real estate inventory is extremely low. Population growth in the PNW is far exceeding existing housing and new construction. This will put sustained upward pressure on home prices. Home buyers will need to negotiate competitively. Existing homeowners will experience considerable equity gains as demand exceeds supply. Real estate values will rise for the ninth year in a row.

Any words of advice for buyers in this market?

Given today’s short supply of real estate, it’s critical to have financing in order ahead of time. Sellers are receiving multiple offers. Listing brokers are dutifully scrutinizing offers to validate that buyers have their financing in order. Be sure to start the loan process early if planning to purchase in this market. The days of finding the right home and then securing financing are a thing of the past.

Do you have any words of caution for horse property buyers?

Today’s real estate market is full of companies, both in sales and lending, spending heavily on fancy ads, offering everything for nothing and not delivering to the consumer. When it comes to purchasing real estate, I’m a firm believer that hiring the best, local professionals is the only way to go. This is the most important financial decision a buyer is likely to make and is not the place to cut corners to save a buck. Especially in this real estate climate, local professionals know the market, are well connected, dialed into the process, and are worth their weight in gold.

 

Jeremey Beck manages the Caliber Home Loans Office in Everett, Washington. In his 15 years in the mortgage industry, he has funded over $400,000,000 in mortgages.

Born and raised in the rural Sandhills of Nebraska, Jeremey worked in his family’s agri-business, so he’s no stranger to rural living. Jeremey and is family call Whatcom County home. His wife and daughter are horse enthusiasts, and as a result, Jeremey has become quite the fence builder.

 

View the full April 2020 edition here

 

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