In the current low inventory environment, home prices are going way up and house hunting has become quite a challenge. The number of homes for sale are low nationwide which is why it will take you longer much longer to find the right house.
Attempting to buy a house in this current market can make an already difficult task of buying your new house even more overwhelming. Your challenge would not only be to find a suitable house that you like but also beating all other homebuyers who like that house and want to make an offer for it.
This means that if you want to end up with a perfect home, you really need to be strategic with your house hunting process.
Here are some of our tips and guides that will make your house hunting process in this tight market more successful and a little less painful.
1. Get pre-qualified for a loan
Getting pre-qualified for a loan means that you go to a lender before you have started your house-hunting in order to find out how much of a loan you can get. Lenders usually examine your current financial situation, credit card score, debts and your income to approve your loan application.
It is advised that you get done with this process before you start looking for a house because in this today’s low-inventory market a vast majority of your competitor home-buyers have cash or they can prove that they can get the loan. As a result, there won’t be any need of loan contingency in most of the biddings. Hence, these buyers with cash or already approved loan will win the bidding war compared to those who still need loan contingency.
2. Find a Real Estate Agent
You are definitely going to need a Real Estate professional throughout the process of buying a new home. So start your hunting with an experienced Real Estate Agent and a Mortgage Broker who can help you get your dream house in reasonable time.
If your agent is a professional and is good at what he does, it will take you comparatively much less time to buy a house and close the deal. On the other hand, if your agent is incompetent, he will keep showing you houses that don’t fit your needs and budget and will ultimately waste a lot of your time.
To find an experienced and qualified agent, do your online research, ask around and get references from the people you trust. It will definitely help you expedite your buying process.
3. Identify Desired Neighborhoods
Home buyers should analyze their needs and wants and then try to find a corresponding desired neighborhood that best fits their criteria. It’s important that you make a list of must have’s and what you are flexible on to go ahead in your house hunting process.
You do have to be a little accommodating on your demands of a new house because you certainly can’t get everything in a house that you have hoped for. For example, if you want a move-in ready house, you may have to fall back to a decent house that needs little work.
However, it is important that your house meets your basic criteria like if you want to buy a house that is near to your office and has a spacious backyard, you should stick to it and don’t give in to the pressure of the tight market because you can’t change these factors later on.
4. Refine your search
Many Real Estate experts encourage home buyers to look at online resources and browse through their local real estate listings in newspaper and websites. These resources usually have comprehensive property listings and market data to make you familiar with the on-going rates and market trends so that you can make an informed decision.
In this current seller market, it is important that you refine and strategize your research to make a smart bidding that will eventually end you up with a nice home.
5. Getting in touch with the Listing Agent
Make sure that your real estate agent is in touch with the listing agent of a listing you are interested in. This will give you a better idea of the competition going on for that property.
If you really like a house, getting in touch with the listing agent will definitely give you an insight of the seller’s demands and expected closing bid price. This way, you will be able to make an educated decision on how much you should bid and whether it is worth it or not.
Also, try to find out how much work a listing would need from the listing agent. You surely don’t want to bid on something that sells cheap but will cost you a much greater amount later on.
6. Check out Listings that are back on the market
Sometimes, listings that return to the market after being taken off are where you can find your best shot of finding a reasonable priced house. There may be people who took their property off the market a year ago because they couldn’t get enough money for it to pay off the mortgage. These home owners might have not gotten around the new listings and sell it at the old price which in most cases is much cheaper.
You can also look at the properties that are in the market for long because there are chances that you can find something good there and can bargain. The longer a property is on the market, the more likely it is to be considered a relatively lower offer. Another good thing about such properties is that you don’t have to compete with as many buyers as on a new listing.
7. Be ready for a quick decision
In this current market, homes rarely stay on the market for long. So, if you find a house that fits your budget and checks off all of your must-haves, you must make a bid quickly.
You should be ready to make a quick decision or you may miss out on the opportunity of buying your dream house.
We really hope that these tips and guides will help you in your house hunting process in this seller market. For more queries, feel free to contact us any time!
Buying a house is quite a big deal for most of us. Most buyers can’t put up enough money to purchase a house upfront. Therefore they rely on a mortgage which they can pay off over a period of time. This process significantly reduces the upfront payment that a buyer has to make, but increases the overall amount. Thus, while buying a house you wouldn’t want to hurry to make any decisions. It is a good practice to search around not just for the house, but also the payment and mortgage options as well.
We all can agree on the fact that the most important factor while buying a house is the interest rate on your mortgage. Typically, you would want to get the lowest interest rate on your mortgage. But what really determines the interest rate? That is a little tricky to find out even for the smartest of the borrowers.
Knowing what factors govern the interest rate on your mortgage will really help you in getting the lowest interest rates. So here is a breakdown for you to know more about the interest rate and how to determine what amount of interest rate you would be paying for the mortgage of your dream house.
The amount of money that you borrow from your lender to pay for your house is called the principal. There is also an additional amount that you have to pay to your lender called interest rate for borrowing the money. This interest rate is a percentage (typically from 4-5 %) of the principal that you have left to pay. Small amounts of this interest rate are added to your monthly mortgage payment. Since this interest rate determines the overall price you have to pay for your house, you must pay special attention to it before making a decision. Saving even a fraction of the percentage of the interest rate will save you thousands of dollars by the end of your mortgage term.
The interest rate on the mortgage fluctuates just like the prices of automobiles or gasoline. So, it is a good practice to study past trends and figure out what time would be best for you to apply for a home loan. This technique will surely make you more informed about the whole procedure and will allow you to have a good conversation with your lender helping you understand your mortgage choices.
What Factors Determine Your Interest Rate
- Down Payment
A down payment is the money you pay upfront for the house. Usually, a larger down payment means a lower interest rate. Often when the buyers put 20% or more upfront payment, they will get a lower interest rate than the buyers who are able to put only a 10-15% upfront payment.
This is because when you pay more money as the down payment for your house, it increases the mortgage lender’s trust in you that you will be able to pay the rest of the money as well. It decreases the risk for lenders. Hence people who put up more upfront payment are rewarded with lower interest rates.
- Credit Score
Lenders will take a look at your credit score to know if they can trust you to let you borrow their money. Generally, buyers with higher credit scores get lower interest rates than the ones who have a lower credit score. Lenders use your credit score information to determine how reliable you will be in paying your monthly mortgage payments.
Credit scores are calculated by the information on your credit history including the loans you took, credit card usage and payment history. Whenever you take out a loan, open a financial account or buy real estate, your credit score is affected.
Your ability to pay back your mortgage affects your overall credit score, so it is very important to find a mortgage plan that you can afford.
- Home Price and Location
One of the factors that affect your mortgage loans is the price of the home you are buying. The interest rate is higher for the house payments that are particularly larger or smaller.
The amount that you need to borrow for your house includes the home price, plus the closing costs, minus the down payment. So, a larger house payment typically results in a greater interest rate.
The house location and the state you live in also affects your home mortgage. If you want to get the accurate results of the interest rate for a particular location, get in touch with one of our lending experts to know more.
- Loan Terms
Another factor that determines your total interest paid to your lender is the loan duration. The term, or duration, of your loan is the time in which you completely pay your mortgage. Generally, short-term loans have lower interest rates as compared to long-term loans.
If you are taking a 30-year fixed rate mortgage plan, then your loan will have lower monthly mortgage installment payments. But it results in a greater overall interest paid to your lender. A 15 or 10 year fixed rate mortgage will ask for higher monthly payments but reduces the interest rate paid.
Adjustable-rate loans may also increase the interest rate over time as the market rate fluctuates. So, it is advised to have a deeper look at these different loan payment options and choose the one that best fits your situation.
Annual Percentage Rate (APR)
APR is an important aspect to consider when finalizing your mortgage plan. It consists of both the mortgage lender controlled costs and third-party costs. It reflects the overall cost of the interest rate, processing costs, lenders fee, documentation costs, origination charges, and discount points.
Understanding all these factors associated with your mortgage is important. It is also important that you compare the loan interest rate and overall plan from different lenders and choose the one that best fits your resources. APR is the best way to compare the costs of loans from different lenders as it accurately reflects the total cost of your mortgage loan.
Tips for Getting a Better Interest Rate
There are a number of ways that you can try to get a better interest rate from your lender. Some of the important ones are:
Pay a higher down payment: This is the most effective way to get lower interest rate on your mortgage. Try to save money for some time and then apply for a mortgage, it will definitely reduce your overall cost for the house.
Compare the different options: It is always a good idea to explore your options while buying a house. Compare different lenders and their mortgage plans.
Improve your credit score: Try to gain the trust of your lender by improving your credit score. Don’t max out your credit card limit, pay your debts and bills. It will definitely help you to get a lower interest rate from your lender.
Keep an eye on the economy: Wait for the interest rates to go down in your area. Observe the past trends and make an informed decision.
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