Don't panic on financing, but don't sit on the fence either!

Real Estate Weekly, Sept 15, 1999 by Ellen Bitton

Normally, a rise in interest rates is accompanied by a drop-off in home sales and refinancings. The recent series of hikes and hints of hikes - is meant to rein in the prolonged housing boom and help keep the nation's already red hot economy from overheating.

After months of hinting at a rate hike, Federal Reserve Board Chairman Alan Greenspan finally announced a rate hike last month, pushing mortgage rates to just below 8 percent. His announcement wasn't a surprise to anyone - the well-placed hints of a changing bias caused banks to begin increasing their lending rates even before the Fed officially made its move.

But what is a surprise is that even though rates are inching upwards - and have been now since early spring - home sales continue at an unbelievable rate. In fact, immediately following the rate hike in June, the mortgage industry saw a spike in activity, as the sales of existing single-family homes jumped 10.6 percent in June, the highest level ever.

Far from shutting down the home buying market, action by the banks triggered a new round of activity by folks who apparently had been sitting on the fence. Having held off a little too long and now watching mortgage rates go up, people who had been playing the waiting game (to see if rates would somehow fall back) decided to jump in before more increases came along.

So once again, the Fed has announced a bias toward tightening the money supply, and just last week, banks again raised rates to just over 8 percent.

Our advice to would-be home buyers and refinancers now? Don't sit on the fence. No one really knows where interest rates will be in the coming months. Our guess is that interest rates may inch up again before heading south again.

So, caught between that prospect and a housing market that is heated up like never before, you are well advised to make your move now.

And if you are in the market, but haven't found the right place, keep looking, and get ready to move quickly.

With "For Sale" signs disappearing faster than tables at Balthazar, the home market in the region is tighter now than it has been at any time in recent memory. Buyers stalled by procedures can miss out on the few opportunities that are available - only forcing them to buy their second or third choice - and perhaps stalling the process until rates move even higher.

To buy successfully, you must play by the rules of an overheated market - starting off by staying at least three steps ahead of yourself when you begin thinking about buying a home.

First, research mortgage options. Check rates at local banks, or better yet, let a mortgage broker work with you to find what's best suited to your needs. You or your mortgage broker can also go on-line to scope out mortgages.

Make sure you're "mortgage-worthy": Check your credit report. Clear up any mistakes and resolve any outstanding issues. A good idea: Work with your mortgage broker to get pre-qualified for a mortgage, so that your bid is the winning one.

Make sure your real estate broker is prepared to offer the appraiser at least two comparable sales, and is able to help line up inspectors, title insurance brokers and other professionals whose cooperation you'll need to move quickly.

Get all your paperwork in order - including bank statements, employment verification and any other supporting documents that will help speed the processing of your application.

The need to act quickly is only intensified by the prospect of rate hikes in the future.