I Hate “Date the Rate, Marry the House” But Right Now, It Actually Makes Sense

Why Waiting for Lower Mortgage Rates Could Cost Tampa Bay Home Buyers Far More Than They Save

There is an old cliché in real estate that you've probably heard a thousand times: “Date the rate, marry the house.” I've never particularly liked the saying. It's cheesy, it's overused, and like most real estate clichés, it oversimplifies a complicated financial decision. But after more than three decades selling real estate in the Tampa Bay area, I have to admit something. In today's Tampa Bay housing market, the logic behind it makes an incredible amount of sense.Before I go any further, let me make something very clear. If you cannot comfortably afford the house, don't buy the house. I'm not suggesting that anyone stretch themselves beyond what they can reasonably afford in the hope that mortgage interest rates eventually decline. Homeownership should improve your life, not put you in a financial position you can't sustain. I'm talking about the buyer who can afford the payment today, but looks at today's mortgage rate and says, “I could make this payment, but I'd have to cut back. Maybe we'd eat out less. Maybe we'd skip a vacation. Maybe we'd have to watch our spending for a while. Why don't we just wait until mortgage rates come down?” That's where I think Tampa Bay home buyers need to look at the entire equation, because the interest rate is only one part of the cost of buying a home.

The House You Buy Today May Not Cost the Same Tomorrow

Let's use a simple example. Suppose you can purchase a Tampa Bay home today for $500,000. For illustration purposes, let's use a 30 year mortgage at 6.75%. A $500,000 mortgage at 6.75% has a principal and interest payment of approximately $3,243 per month. Now imagine you decide to wait because you want a 5.5% mortgage rate. Eventually, rates get there. Great news, right? Maybe. Because you're assuming the only thing that changed was the interest rate. What happens if the interest rate goes down but the price of the house goes up? That's the part of the “I'll wait until mortgage rates come down” strategy that I think far too many buyers overlook.

What Happens When Lower Mortgage Rates Bring Buyers Back?

One of the reasons buyers have negotiating power in today's Tampa Bay real estate market is simple. There are a lot of homes competing for fewer buyers. That creates opportunity. Buyers can negotiate purchase prices. Buyers can sometimes negotiate seller paid closing costs. They may be able to negotiate contributions toward prepaid expenses and escrows. In some transactions, sellers are agreeing to address major inspection items or replace expensive components in order to get the deal closed. I'm seeing Tampa Bay home buyers negotiate things like roofs, air conditioning systems, water heaters and other costly repairs and improvements. That's what a buyer's market can look like.

But what happens if mortgage rates fall substantially? Suddenly, buyers who have been sitting on the sidelines may be able to qualify. Buyers who already qualify but don't like today's payment may decide they're finally ready. First time home buyers come back into the market. Move up buyers become more comfortable. Investors may become more aggressive. Tampa Bay and Florida also continue to attract people relocating from other states. When affordability improves and more people decide they can purchase, additional demand can change the negotiating environment very quickly. More qualified buyers competing for the same desirable homes can mean one thing. Today's buyer leverage may disappear.

What If the $500,000 House Becomes a $600,000 House?

That $500,000 home you're waiting to buy could potentially cost substantially more in a stronger seller's market. Let's imagine the comparable home is now $600,000, but you finally get the 5.5% mortgage rate you were waiting for. A $600,000 mortgage at 5.5% is approximately $3,407 per month in principal and interest. Think about what just happened. You waited for the lower interest rate, got the lower interest rate, and your mortgage payment is now approximately $164 MORE per month than the $500,000 mortgage at 6.75%.

Now let's take it another step. Suppose increased demand pushes the price of the comparable house to $650,000. At 5.5%, a $650,000 mortgage would have a principal and interest payment of approximately $3,691 per month. That's approximately $448 MORE every month than financing $500,000 today at 6.75%.

Obviously, these are hypothetical examples. Nobody can guarantee that a particular $500,000 Tampa Bay home will become a $600,000 or $650,000 home, and nobody can guarantee when or whether mortgage rates will reach 5.5%. That's not the point. The point is that waiting for a lower mortgage rate doesn't guarantee that buying the house will become cheaper.

Interest Rate Is Only One Part of Home Affordability

When people talk about Tampa Bay home affordability, they often focus almost entirely on mortgage rates. But affordability is much bigger than the rate. You have the purchase price. You have the down payment. You have closing costs. You have property taxes. You have Florida homeowners insurance. You have the age and condition of the roof. You have the air conditioning system. You have plumbing and electrical systems. You have the water heater. You have potential HOA or CDD fees. You have maintenance and repairs. And then you have something that is extremely important but difficult to put into a mortgage calculator. Negotiating leverage. A lower interest rate doesn't do you nearly as much good if you have to pay significantly more for the house and absorb expenses that today's seller may have been willing to pay for you.

And We Haven't Even Talked About Closing Costs

Imagine buying that $500,000 Tampa Bay home today and negotiating $10,000 toward allowable closing costs, prepaid expenses and escrows, subject, of course, to your loan program and lender requirements. That's $10,000 you potentially didn't have to bring to the closing table. Now imagine waiting until substantially lower mortgage rates bring a flood of buyers back into the housing market. When sellers start receiving multiple offers, what happens to those closing cost concessions? They can disappear. Instead of asking the seller for $10,000, you may be competing against another buyer who isn't asking the seller for anything. That's a significant difference before you've even made your first mortgage payment.

Now Let's Talk About That $15,000 Roof

This is particularly important when buying a home in Florida. Suppose the home you're considering today has an aging roof. In today's more buyer friendly Tampa Bay real estate market, you may be able to negotiate with the seller to replace that roof or provide an appropriate concession, depending on the transaction and financing. For illustration purposes, let's call that roof $15,000. In a hot seller's market, that conversation can be completely different. You may find yourself competing against another buyer who says, “I'll take the roof as it is.” Now you've potentially paid more for the house and inherited the roof expense.

Don't Forget the Air Conditioning System

Anyone who has lived through a Tampa Bay summer knows that an air conditioning system isn't exactly an optional feature. A replacement HVAC system can cost thousands of dollars depending on the size of the house, equipment and installation. Today, you may be able to negotiate that issue. Tomorrow, with multiple buyers fighting for the same house, you may not have that leverage. The same applies to an aging water heater, electrical issues, plumbing concerns and other items that can become important during the home inspection and insurance process.

Florida's Four Point Inspection Changes the Conversation

Florida home buyers also have to think about insurance. A four point inspection generally focuses on four major areas of an older home: roof, electrical, plumbing and HVAC. The age and condition of those systems can affect your ability to obtain homeowners insurance and the insurance options available to you. That means negotiating a newer roof, updated electrical components, plumbing improvements or a newer HVAC system isn't simply about making the house prettier. Those improvements may potentially affect insurability and homeowners insurance costs, depending on the home and insurance carrier. So when comparing buying today with waiting for lower mortgage rates, don't simply compare one monthly principal and interest payment with another. Compare the entire transaction.

The Real Difference Could Be Tens of Thousands of Dollars

Let's put our hypothetical scenario together. Today you potentially purchase the home for $500,000. Perhaps you negotiate $10,000 toward allowable closing costs and prepaid expenses. Perhaps you negotiate a $15,000 roof or other significant repair. Perhaps the seller addresses an aging air conditioning system, water heater or another inspection issue. Now compare that with waiting. The comparable house may cost $600,000 or $650,000 in our hypothetical future market. You may be paying your own closing costs. You may be paying for your own roof. You may be paying for your own HVAC system. And you may have substantially less negotiating leverage because you're competing against several other buyers. Suddenly that lower interest rate doesn't look like the entire story anymore.

Buy the House, Then Change the Rate

And this is where that annoying real estate cliché finally earns its keep. You can potentially change your mortgage rate later. You can't go backward and buy yesterday's house at yesterday's price. If you buy the right home today and mortgage rates decline substantially in the future, refinancing may become an option, depending on your financial circumstances, qualification, equity position and whether the savings justify the costs associated with refinancing.

Imagine purchasing the $500,000 home during today's buyer friendly Tampa Bay housing market. You negotiate a favorable purchase price. You negotiate seller concessions. You get some of the expensive property components addressed. Then, if mortgage rates eventually reach 5.5% and refinancing makes financial sense for you, you potentially end up with something pretty powerful. Today's purchase price with tomorrow's mortgage rate. Meanwhile, you've owned the house. You've been living in it. And if the property appreciates during that period, you've potentially been building equity instead of waiting on the sidelines.

This Is Where the Right Mortgage Professional Matters

One of the biggest mistakes home buyers can make is assuming that the interest rate they see advertised online tells them everything they need to know about financing a home. It doesn't. There are different mortgage programs, home loan products, down payment options, closing cost structures, mortgage rate buy downs and financing strategies that may be available depending on the buyer and property.

After more than three decades in Tampa Bay real estate, I've had the opportunity to work with some of the most successful and experienced mortgage brokers and mortgage professionals in the Tampa Bay area. I'm not a mortgage lender, and I'm not going to tell you which mortgage is right for you. That's the job of a qualified lending professional who understands your complete financial situation. What I can do is connect my buyers with experienced Tampa Bay mortgage professionals who can explain the financing and lending options available to them so they can make an informed decision.

For some buyers, that conversation might involve a conventional mortgage. For others, it could involve FHA financing, VA financing, first time home buyer options, down payment assistance when available, seller concessions, mortgage rate buy downs or other home loan programs. The important thing is to understand your options before assuming you can't or shouldn't buy.

Talk to a Mortgage Professional Before You Talk Yourself Out of Buying

I've seen buyers look at an interest rate online and decide on their own that buying a home doesn't make sense. That's backwards. Before you decide that today's Tampa mortgage rates make homeownership impossible or unattractive, sit down with an experienced mortgage professional and look at the actual numbers.

What purchase price can you comfortably afford? What would your actual monthly mortgage payment be? How much money would you need for a down payment? What closing costs should you anticipate? Could seller concessions reduce some of your upfront expenses? Would a mortgage rate buy down make sense? Are there home loan programs available that you haven't considered? Those are questions worth answering before deciding to continue renting or postpone buying a Tampa Bay home.

Sometimes the Seller Can Help Make the Financing Work

This is another advantage buyers may have in today's market. When there are more homes competing for fewer buyers, motivated sellers may be more willing to structure a transaction that helps the buyer get to the closing table. Depending on the loan program and applicable limits, that might include seller paid closing costs, prepaid expenses or contributions toward a mortgage rate buy down.

Instead of simply negotiating the last $10,000 off the purchase price, there are situations where using that money strategically toward allowable buyer costs or financing may provide a greater immediate benefit. That's where an experienced real estate agent working alongside an experienced mortgage professional can become extremely valuable. It's not just about negotiating price. It's about structuring the entire transaction intelligently.

This Is One of the Best Buyer's Markets I've Seen

I've been selling Tampa Bay real estate since 1991. I've worked through booming real estate markets, recessions, the housing crash, foreclosures, short sales, historically low mortgage rates, multiple offer bidding wars and some absolutely crazy periods in Florida real estate. Other than perhaps the extraordinary opportunities we saw around 2010, 2011 and 2012, today's Tampa Bay housing market offers buyers something I haven't seen very often. Leverage.

There are homes to choose from. Sellers are negotiating. Buyers can compare properties. Home inspections matter again. Seller concessions exist. Closing cost assistance can sometimes be negotiated. Repairs can sometimes be negotiated. And in certain transactions, buyers can negotiate improvements that would have been laughed out of the room during the bidding war years. Will that last forever? I certainly wouldn't count on it.

What Happens If Everybody Waiting Decides to Buy at the Same Time?

This is the question I think buyers need to consider. There are people all over Tampa Bay saying essentially the same thing. “I'm waiting for interest rates to come down.” Okay. What happens if they do?

Those people don't disappear. They potentially become buyers. If thousands of prospective Florida home buyers who have been sitting on the sidelines suddenly decide that mortgage rates have reached a level they like, they could begin competing for the same inventory. More demand can mean less negotiating leverage. Less negotiating leverage can mean fewer seller concessions. It can mean fewer repair requests being accepted. It can mean more competition for desirable homes. And depending on supply and demand, it can potentially put upward pressure on Tampa Bay home prices. Again, nobody knows exactly what the future housing market will do. But waiting isn't a risk free strategy either.

Don't Focus So Much on the Mortgage Rate That You Miss the Opportunity

If you're thinking about buying a home in Tampa, Lutz, Odessa, Carrollwood, Wesley Chapel, Land O' Lakes, New Tampa, St. Petersburg, Clearwater or anywhere in the Tampa Bay area, don't make your decision based solely on today's mortgage rate. Look at the whole transaction. Look at the price you're able to negotiate. Look at seller concessions. Look at closing costs. Look at the roof. Look at the air conditioning system. Look at the water heater. Look at the insurance situation. Look at the home inspection. Look at your financing options. Look at how much competition you have from other buyers. And most importantly, look at the house.

If you can comfortably afford it, it's the right home for your family and you can negotiate a great deal in today's market, don't automatically assume waiting for a lower interest rate will save you money. It might. But it could also cost you a hell of a lot more. Maybe “date the rate, marry the house” isn't such a stupid saying after all.

Thinking About Buying a Home in Tampa Bay?

Whether you're a first time home buyer in Tampa, relocating to Tampa Bay, moving up to a larger home, downsizing, searching for luxury real estate, purchasing an investment property or simply trying to understand today's Tampa Bay housing market, knowledgeable representation can make an enormous difference. After more than three decades selling real estate throughout Tampa Bay, I've developed relationships with some of the area's most experienced and successful mortgage professionals. I can connect you with qualified lenders and mortgage brokers who can explain the home loan programs, mortgage rates, down payment options, closing cost assistance, financing strategies and lending options that may make the most sense based on your individual circumstances.

Buying a home isn't simply about asking, “What's today's interest rate?” It's about finding the right house, negotiating the best possible transaction, understanding your financing options and making a decision based on the complete financial picture.

I've been helping buyers and sellers navigate the Tampa Bay real estate market since 1991. If you're searching for Tampa homes for sale, Lutz homes for sale, Odessa real estate, Carrollwood homes for sale, Wesley Chapel real estate, Land O' Lakes homes, St. Petersburg homes for sale, Clearwater real estate or Tampa Bay luxury homes, I'd be happy to help you understand today's market and connect you with the professionals you need to make an informed decision.

Vincent Arcuri | Real Broker LLC | 813 VINCENT | 813 846 2368 | Search Tampa Bay homes: TampaPad.com