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5 tips to make home-buying easier: BoFA

A survey from Bank of America's annual Homebuyer Insights Report shows that 72% of prospective homebuyers worry rent increases could affect their current and long-term finances. Housing inventory remains low, keeping the price of homes higher.

Bank of America Head of Consumer Lending Matt Vernon joins Wealth! to give insight into how to make buying a home a little easier.

Vernon stresses the importance of keeping a good credit score: "First and foremost, just be cognizant of your credit score and ultimately do things to prioritize and improve it. Having a good credit score is not only good to get approved for a loan from a lender. It also can provide benefits from a rate perspective, which would be very important in the rate environment that we're in today."

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

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This post was written by Nicholas Jacobino

Video Transcript

As shelter remains a sticky area of inflation rising 4/10 of a percent in April.

And specifically, rent costs remain a big problem.

And that aligns with the New Bank of America survey actually, that reveals many prospective home buyers fear the long term consequences of renting including 72% who worry that rent increase could affect their current and long term finances here.

With more.

We've got Matt Vernon who's Bank of America's head of consumer lending.

Great to have you here with us.

Let let's dive into that w where and as we're kind of really just grasping some of the data in this survey here, where are you seeing some of the sentiment line up right now among renters?

Yeah, interestingly enough as you already set up, most renters in the survey responded, saying that ultimately, while they believe in the short term that renting may be a good decision based upon the current environment that your previous um previous uh reporter talked about, um They also believe that they're missing out on long term financial assess that home ownership ultimately brings.

So they're making a short term decision.

Um but they know that they're sacrificing potentially long term.

And in fact, s 80% of those surveyed that are renting today, believe that they will, I'm sorry, 76% will, will buy within five years.

Thanks for throwing that up there.

And you know, it's, and, and as we're taking a look at the stats, it comes to mind that there are a lot of potential, potentially a lot of renters out there that are not actually paying the market rate, they're paying a, a different rate that the 10 that the landlord is willing to give them in order to make sure that they don't have to um you know, report something different uh at the end of the day.

So uh the the gap or the delta between those two prices, what's actually being paid versus what's being reported, where is that gonna start to eventually show up in easing some of the shelter costs that uh economists that we speak with in our program are continuing to cite as one of the stickiest and most troublesome parts of the inflationary picture.

Yeah.

Hey, it, it's all supply and demand in so many respects, whether we're talking about rental inventory or we're talking about home inventory.

And until we begin to see that, that that inventory grow and ultimately supply and demand become more balanced, we'll still see that gap.

Although there are some early signs, as I think the, the previous reporter stated that we're beginning to see that number come in additionally, when you think about the number of plans for purchasers out there, how many of them either based on the survey or based on what you're hearing in the pulse of potential home buyers out there are just waiting for a, a wave of interest rate cuts right now.

Yeah, I, I think that's on everyone's mind and it's, it's both the existing homeowners and that may have a rate that is in the threes and two, even twos and fours.

And then the prospective homeowners that are looking at that seven handle rate that you talked about, that said the mortgage market is expected to be close to a trillion dollars from a purchase perspective this year.

And our survey says that folks are still believe in the dream of home owners that ultimately they understand that rental may be short term, but the sense of permanence of a home of his financial accomplishment of owning a home is still alive and well with consumers today, what can consumers do prospective home buyers do in order to get ready and ready themselves, uh in order to make sure that they can jump on an opportunity once the opportunity seems right.

Yeah, Brad, it's a great question.

It's primarily 4 to 5 things first and foremost, um be cognizant of your credit score and ultimately do things to prioritize and improve it.

Having a good credit score is not only good to get approved for a loan from a lender.

It also can provide benefits from a rate perspective, which would be very important in the rate environment that we're in today.

Second is safe and you got it up on the screen.

I mean, it really is important to create a budget pay yourself and ultimately save for that down payment and unexpected costs that come with homeownership down the road debt is a big thing.

Lenders look at the debt to income and the ratio between the two.

So minimize debt and ultimately only take on more debt unless absolutely necessary.

And if at all possible, as part of your savings plan paid down on that debt and then four prepare your finances.

That really is having a realistic understanding of the home that you can comfortably afford, not the mansion out of the gate, but the home that you can comfortably afford and last but not least be ready.

You said jump on in a competitive environment.

It's incredibly important that prospective buyers get pre approved from a financial institution such as Bank of America so that we that when they go in and make that offer on the home of their dreams or in the right community with the right schools that the buyers see that they're ready, they're pre approved and that they can accept that offer.

I mean, Matt, my home buying strategy is similar to me going to top golf.

I'm just swinging for the back net every single time Uh So hopefully I can heed a little bit more of your advice and prepare for something a little bit more reasonable out of the gate here for a lot of home buyers.

Just lastly while we have you, it, it seems like their home affordability or the home affordability equation also factors into a lot of who their pick for president might be.

But al almost flipping that on his head even once we get post election, does that change the home buying sentiment for people depending upon who's in the White House?

No, II, I don't believe so.

I've been through many cycles with, uh, whether it's a Republican, a democrat, um, or ide idea technology changes, ultimately, that homeowner is going to think very similarly and, and it's all gonna be based upon their per effective picture financially what they hope to achieve.

And then the environment that we're operating in more so than the political nature of who's in the White House.

Matt, really solid insight and context there, Matt Vernon, who is the Bank of America head of consumer lending, Matt.

Thanks so much for the time.

All right.

Thank you, Brad.