With promises of low interest rates and home prices forecast to rise later this year, the time to buy a house may be now.
To successfully buy a home in 2021, and to come out the other end satisfied with your purchase, it helps to understand the process as a whole. It’s suggested that you conduct your research into things like lender qualification requirements, and how to navigate home buying now that we have to worry about social distancing and vaccines in the face of the COVID-19 pandemic.
As you get ready to buy a home, keep a few expert tips in mind. The following checklist should help.
Be Eagle Eyed and Act Fast
We are in a seller’s market. That means the house you just noticed for sale online likely won’t be available tomorrow. That is, unless you’re prepared to snag it up with a hefty down payment. With far more buyers than there are homes for sale, the time to strike is the moment you notice your ideal home is for sale.
It helps to have a profile in mind of what the perfect home would look like, and what amenities it might have. How many rooms and bathrooms does your family require? How many windows and doors would you prefer, and what about their placement? For that matter, what materials would you most like to see on the countertops and floors? What type of roof would your perfect home be topped with?
With all that goes into the home buying process, you have lots of decisions to make. Having a rough outline of the perfect home helps you identify the one you should act on the moment it becomes available.
Be Flexible
On the other hand, don’t be so quick to discount a home because it doesn’t mesh with your vision. Be willing to make concessions if you hope to be rewarded with a good home in a hot market.
You’ll also want to be flexible when it comes to your budget. That being said, never make an offer you can’t afford. Talk to your real estate agent to get insight into your local market before making a strong offer, including one that may be slightly outside your comfort zone.
Watch for Rising Home Prices
In 2020, real estate experts were amazed to see home prices jump a whopping 10%. The good news is that the rates for good homes aren’t expected to grow as fast this year. Prices for existing homes are only expected to rise by 5.9% in 2021, according to forecasts from Fannie Mae, Freddie Mac, the Mortgage Bankers Association, and the National Association of Realtors.
Home Hunting at the Right Time
Home prices can vary according to the season. Homes tend to jump in price during the summer months of June and July. Conversely, home prices tend to plummet at the beginning of the year and through February.
The summer months are also when home listings are highest, which means you may end up paying more, but you’ll have more homes to choose from. With more homes comes higher demand, so be ready for tons of competition from other hungry buyers.
In the winter, there may be fewer homes, but homes tend to stay on the market longer. Research shows that homes spend an average of 92 days on the market during the winter months compared to 76 days during all the other months of the year.
Take Advantage of Lower Mortgage Rates
While home prices jumped in 2020, mortgage rates saw record lows. Economists expect this trend to continue through 2021. A 30-year-fixed-rate mortgage is projected to average 3.19% this year compared to 3.44% in 2020.
Even though interest rates may be attractive, do your due diligence to find a mortgage lender that offers rates and terms you can afford. It’s always wise to contact a few lenders and compare them side by side before making such an important decision.
Social Distancing? Technology to the Rescue
The pandemic forced many of us to rely on technology to connect with others. Tools like Zoom and Slack don’t just work for business. They can also work for real estate dealings. Many realtors are offering virtual home tours and e-closings for your safety and convenience.
You’ll still see small open houses occasionally, as things begin to open back up. But this is also where research can help you navigate the rules around 2021 home buying. Look up the social distancing regulations in your state, county, and city, such as the need for vaccines before in-person meetings can take place.
Just know that many realtors will accept the use of virtual technologies to help you navigate the home buying process. Ask your realtor about these tools if you feel more comfortable using them on account of the pandemic.
Shop for a Lender Prior to Your Home Search
Imagine you find a home you love. You go through the process of buying the home only to find out later that you failed the lender application. Turns out, your credit score was lower than you thought it was. Conducting your home buying in this fashion will only result in heartache.
The far better way is to secure lending before you begin searching for a home. Gather your finance information together and conduct a search for lenders the same way you search for a home. Identify the qualities you want and compare the best you can find against one another. Doing it this way also gives you time to boost your credit score before committing to a house you love.
When you find a good lender, go through the pre-approval process. The lender will ask for your income, any debt you may have, and records of your financial accounts. If you become pre-approved for a loan, the lender is saying that you are approved for a certain amount under certain terms. While this decision from the lender isn’t a final approval, it may give you a leg up in the negotiation process because it shows you’re a serious buyer worthy of attention.
Boost Your Credit Score
There is no set credit score number needed to buy a house. The credit score you need depends on the type of mortgage you eventually decide upon and the lender. In 2021, we may see some lenders raise the bar on credit score requirements in light of the COVID-19 pandemic.
Of course, we may also see lenders loosen their credit requirements as the economy strengthens in 2021, but you may find it tough to find a lender willing to work with you if your credit score is on the lower end.
To boost your credit score fast in time for your home buying search, check your credit report. Any errors you notice, be sure and report them to the top three credit bureaus - Experian, TransUnion, and Equifax - using their online reporting methods. You can also attempt to reduce any debt you have. A ProTip is to apply your tax refund to your debt, which may improve your score enough to buy the home you want.
Have a Substantial Down Payment
Another way to mark yourself as a serious buyer is to have a down payment ready to hand over at a moment’s notice. The amount you’ll need may vary depending on the mortgage you secure and the lender who owns the debt. In 2021, we could see down payment requirements as low as 3% for conventional mortgage loans.
Increasing your down payment will usually result in lower interest rates and a lower monthly payment. Plus, with a large down payment, the seller may be able to accept your offer faster, because they see just how serious you are.
Why Not Build a Custom Dream Home Instead?
Buying a pre-existing home has the benefit of allowing you to move in right away upon closing. A custom home, however, allows you to customize the home from the foundation to the roof. You can decide the number of rooms and windows, the type of roof, even the neighborly community where the home will be built.
Don’t spend your entire weekend searching through home listings. A better way to spend your time is to start dreaming up your idea of the perfect custom home. Then let Ashford Homes build your new home on a picturesque plot of land in or around Cincinnati, Ohio. Learn more by calling our building experts. We look forward to helping you with the custom home buying process. Call 513-442-5555.