Is a fixed-rate buyer a better option in this hot real estate market?

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Q: The purchase offers on our parents’ Bay Area home have been circulated to my adult siblings. We are under the impression that fixed-rate homebuyers are stronger than adjustable-rate buyers. Is that true? If so, should we set aside the purchase offers with adjustable-rate mortgages?

A: No, not true. Bay Area loan officers are now reporting the use of adjustable-rate mortgages. So, do not set aside purchase offers based on fixed rate vs. adjustable rate. Home prices and interest rates continue to spike. There are 101 cities in the San Francisco Bay Area. As a result, depending on the property’s location, down payments might be $150,000 to $1,050,000. That alone shows buyer determination to purchase the property.

Today’s homebuyers have more substantial loan commitments. The market demands it. During COVID-19, noncontingent homebuying practices swept the nation, meaning that a home sale must close successfully. Otherwise the homebuyer could lose their earnest money deposit should the lender refuse to fund the loan to complete the transaction.

Additionally, the Savings and Loan Crisis, the Dotcom Era and the Great Recession shared dubious lender procedures in approving real estate loans. That’s no longer the case. Today’s lending practices see loan officers gathering a buyer’s complete loan application and supporting documentation. Then the lender verification process begins. In a win-win scenario, some lenders go so far as to process and underwrite a homebuyer’s loan.

Housing prices, inflation and interest rates are rising. You and your siblings should not be surprised that prospective homebuyers, given a choice, opt for the lower adjustable monthly housing payments. Conversely, you all should be surprised there are too many offers on the family’s negotiating table.

Questions, concerns or inquiries? Realtor Pat Kapowich is a Certified Real Estate Brokerage Manager and career-long consumer protection advocate. His hometown of Sunnyvale, California, is where he is based. Office Landline: 408-245-7700, Pat@SiliconValleyBroker.com Broker# 00979413 www.YouTube.com/PatKapowich