In a year where uncertainty is the only certainty, there’s one bellwether industry leading a flock of others to prosperity. We’re talking about the housing market, of course. Several factors are driving a persistently robust housing market Including:
- A lack of inventory
- Low interest rates
- Exodus to the suburbs
According to a recent housing forecast by Realtor.com, “Home sales are constrained by low inventory and diminished seller and buyer confidence as the effects of COVID linger in the labor market,” Realtor.com Chief Economist Danielle Hale writes -
“While mortgage rates will be favorable, qualifying criteria will be tougher than recent years as lenders seek to mitigate their own risks against economic uncertainty.”
According to Hale, this means buyers need to scrape together more cash for a down payment and bring high credit scores to the table to secure a loan with a reputable lender. With little inventory and mortgage rates at historic lows, shoppers must get savvy, and quick.
So, while you’re shopping around for the best rates and terms, make sure to check your credit score. It’s is a crucial factor that affects your loan terms and interest rate. You can find more general advice on applying for loans here.
Aside from the basics we already mentioned, BBB Northwest + Pacific offers these five tips to make first time home buying a bit easier:
- Do your research: It's hard to know if you're getting the best deal if you don't compare offers. Applying to multiple lenders allows you to compare interest rates and closing costs and can even allow you to leverage offers against each other. But there are drawbacks. Applying to many lenders could affect your credit score as each lender must make a credit inquiry. And multiple credit inquiries by mortgage lenders may prompt the credit bureaus to sell your information to mortgage lenders and leave you dodging junk mail and robocalls.
- Get financing before browsing: Houses can enter and leave the market quickly. You could be setting yourself up for frustration and heartache if you begin looking before your funding is in place. First-time homebuyers may be surprised to see how much mortgage lenders approve them to borrow and this could affect where you begin your house search.
- Know what you want but prepare for compromise: It is rare that a first-time home buyer can purchase their dream home. So dream big, but consider what you’re willing to compromise on and what you’re not.
- Consider using an agent: Buying a home can be stressful but having a professional by your side can make the process easier. Buyer's agents help you find the right property for your budget and expectations, negotiate offers on your behalf, and answer the questions and concerns that arise
- Budget for after move-in expenses: Saving for a down payment and closing costs are just as important as saving for the things you'll need immediately after moving in. The cost for utilities, changing the locks, purchasing furniture and paint can add up. To stretch your dollars, make a list of the items you will need to be done immediately after moving into your new home. Get quotes on those jobs, so you know you're getting the best deal for your dollar.
Buying a home is exciting, but it can also be risky.
Although emotions may be running high, especially as you prepare to move during a pandemic, be wary of these pitfalls before you purchase your new home:
- Going over the preapproval limit: It’s up to you, the borrower, to assess your financial situation and know how much you can safely spend. Ask your realtor to show you homes near the lower end of your preapproval limit. A more expensive home could leave you paying more each month and will make it challenging to take on unexpected costs that will arise during homeownership.
- Blowing your budget in a bidding war: In a competitive real estate market like we’re experiencing now, multiple hopeful buyers may submit an offer on the house you want. If your dream home has another offer, it can be tempting to jump to the top of your preapproval limit. Take some time to consider how the higher mortgage payment would affect your life over time and whether or not it's worth it.
- Skimping on the home inspection: Once an offer is accepted, you move on to the home inspection, which reviews the condition of the home inside and out. It's important to note that not all home inspections are equal. As the buyer, you will hire a company to complete the inspection, so do some research and compare services and costs. Make sure the inspector will access every part of the home like the attic, roof, and crawl spaces. Plan to attend the inspection so you can ask questions and have the inspector show you anything of note. If you can't be there, ask your agent to go in your stead.
Remember, Better Business Bureau keeps records on millions of businesses. You’ll need to hire everyone from a realtor and lender to an inspector, painter, locksmith, HVAC company and more. Whether it’s a foundation that needs a fix or a roof that needs to be replaced, head to bbb.org to search for the professionals you can trust, vetted by the BBB. On our website you can find out what other customers say about companies and find more tips to be a smarter homebuyer.
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