It’s official – the spring homebuying and selling season has kicked off.
Are you ready to rumble?
The US housing market displays conflicting signs, which leads to uncertainty and confusion. Despite falling home prices, they are also on the rise. While mortgage rates have been slightly decreasing, they remain unpredictable. Although the job market is the strongest in 50 years, home sales have declined for 11 consecutive months. As a result, it is common to feel uncertain.
The cost of financing a home significantly increased in 2022 compared to previous years. But, on the bright side, the average rates for fixed-rate mortgages have reduced from the peak of over 7% in the last year, which can benefit those looking to buy a house.
You have a good chance right now, so taking advantage of it is a good idea. However, even in markets with multiple competitive offers for a reasonably priced house, the excitement among buyers is relatively restrained.
So if you don’t feel prepared to tackle this buying and selling season, here’s how you can get ready to make moves.
Get Pre-Approved for a Loan
The housing market is experiencing a shortage of available homes due to many homeowners hesitating to give up their low mortgage rates from the past few years. As the supply of homes is predicted to increase this spring, it’s important to not only get pre-qualified for a loan but also pre-approved.
Both pre-qualification and pre-approval processes are beneficial when buying a house. However, pre-approval holds more significance. Pre-qualification relies on the financial information given by the buyer and provides a rough idea of their affordability.
The pre-approval process involves a lender verifying data and conducting a credit check. Then, the lender will provide a conditional offer for a specific loan amount if approved.
It’s important to remember that the pre-approval process results in a “hard inquiry” on your credit report, which can temporarily lower your credit score due to the lender looking for more detailed information about you.
Take Advantage of Less Competition
As spring progresses, agents recommend not waiting on mortgage rates since the market is expected to see more buyers.
When you’re prepared and financially stable enough to purchase a home, it’s more important to focus on finding a home that fits your budget than worrying about daily fluctuations in interest rates.
Real estate agents often advise their clients to prioritize finding a home they love and can afford and not to become overly concerned with the current financing options. They suggest that the financing terms can always be altered later, so focus on buying the best house you can comfortably afford.
Check for Homebuyer Assistance Programs
For new homebuyers, one of the biggest challenges is getting enough money for a down payment. A 20% down payment is the norm; anything less might require private mortgage insurance. However, a lot of people end up putting down less. According to the National Association of Realtors, last year, 97% of first-time homebuyers put down an average of 6%, while repeat buyers put down an average of 17%.
There are loan programs available that offer down payment assistance to eligible borrowers. These programs can be more budget-friendly than conventional or Federal Housing Administration (FHA) loans. Therefore, it is advisable to apply for them at the earliest opportunity.
Specialized programs are available for individuals in specific industries such as education, law enforcement, healthcare, and public service. Additionally, there are programs aimed at those purchasing a home in a particular neighborhood. Many of these programs cater to low to moderate-income families and are geared towards first-time homebuyers, which may refer to individuals who have not owned a home in a certain number of years.
Make a Plan to Reduce Your Mortgage Payment
When mortgage rates are high, financing a home can be trickier as buyers strive to find ways to lower the interest rate they choose, which can result in significant savings of several hundred dollars per month.
To reduce your payment, consider putting more money down upfront, using your savings, or receiving a monetary gift from your family.
To decrease their monthly mortgage payments, borrowers can pay a higher amount initially to lower their mortgage rate. This can lead to a permanent or temporary loan interest rate reduction. However, it typically takes around five years to recover the cost of paying down one point. Therefore, if the interest rates are expected to decrease considerably during this period, or you don’t plan on staying in the property for that long, it may not be wise.
To lower monthly payments, buyers can request a seller’s credit or concession during the transaction. This amount can be used to decrease the interest rate on the mortgage and subsequently diminish payments. Remember, finding a cooperative seller is crucial for this approach. However, the chances of success may be slim if there are many offers.
To cut down mortgage payments, buyers can explore various lenders such as traditional banks and credit unions. It’s recommended to compare options from different types of lenders.
You have a lot of opportunities this spring, whether you’re selling or buying a home. Why not make the best of the season? If you’re ready to discuss real estate, schedule an appointment with me, and let’s talk about your options.
