Making the transition to becoming a homeowner has always come with a mixed bag of emotions—a mixture of excitement, nervousness, joy, panic, and so on.
Understandably, even people who have been planning and have everything in order feel like this since owning a home is a life-changing time.
It hammers home the fact that we are acting and living on our own two feet!
These last two years have brought on an all-new set of emotions for people looking to buy their forever homes—since the pandemic through everything into a shamble.
In Q1 of 2022, the median price for a house up for sale was nearly $361,500 compared to $313,500 in Q1 of 2021, a near $50,000 increase in a year!
This year has brought its own set of dilemmas, but that hasn’t stopped us as we have been slowly easing into a somewhat stable recovery and attempting to reestablish how life was like pre-pandemic.
Only time will tell how the rest of this year goes, especially with inflation having had a vice grip on the economy over the past few months.
Opportunities for buyers
Speaking of inflation, it seems to be leveling off a bit, and the economy has gained some breathing room. How does this help new homebuyers?
● Surprisingly with inflation remaining pretty high, its increase has slowed, giving more time to potential homebuyers to find the right home for their needs.
● Other than this, If you’ve been putting off buying a home by continuing to rent and save money, now may be the time to buy because inflation is the enemy of every renter with a fixed income.
● You can also think of it as an investment; only you are investing in yourself instead of making your landlord richer. It also helps to build your credit!
Why buy a home now?
Is there still a reason to buy a home today? With all this talk about inflation, high prices, high demand, and lack of inventory, is there any real advantage in becoming a homeowner and taking on that responsibility?
Let’s first see how we got here:
● At the start of the pandemic, we know that public fear of not knowing exactly how dangerous covid was at the time caused businesses to close and people to move to remote work.
This means that people were less inclined to put their homes up for sale and give up the one place of familiar ground they had left.
● Obviously, this meant that houses available for sale went down dramatically as well as housing starts (new residential construction), resulting in a lack of inventory.
● During this period, many people realized that their jobs didn’t have to tie them to the office or the city where they worked.
This resulted in increased demand from people wanting to move to their idyllic places like being closer to family, moving to the countryside, etc.
● Here lies the issue, high demand, and low inventory equal increased prices. Additionally, mortgage rates did drop significantly between 2020 and 2021.
As things are now, the situation seems to have flipped. Mortgage rates have increased again, rising above 5%.
Meanwhile, housing starts and inventory have increased, meaning buyers are being more cautious about where they want to live.
The critical thing to take away from this is that even if you’ve missed your chance to get a good deal on a mortgage during the record-low period, this should not deter you from making a decision.
The market will keep changing, and even though mortgage rates have gone up again, they have remained within a specific range.
You should make your decision based on other, more personal factors.
Are you personally ready to take on the task of maintaining a house?
a. How is your debt-to-income ratio fairing?
b. How is your credit score looking?
c. Do you have enough money saved up, OR do you make enough from your job to deal with any eventuality that could emerge? Like water damage that can cost over $2,000.
d. Is buying a home the logical next step to take?
These are questions you should answer before making a decision.
How to deal with the current housing market?
One thing that can help make the decision easier is to learn from the experience of other buyers. They are an excellent resource for seeing what they did to navigate the current market.
A good place to start would be to find out which states, cities, and towns where people are flocking to the most. When you begin your search so you can get the most bang for your buck.
According to a study by Redfin, people have been fleeing cities like San Francisco, Los Angeles, and New York due to their high-priced lifestyles and heavy populated and expensive metropolitan areas.
Location of the house does matter
Instead, they are opting to move to places such as Florida (Miami, Tampa, Cape Coral) and Phoenix, AZ.
Buyers give the reason that they can get more of their money’s worth in these cities than in coastal places like San Francisco, where a typical home could cost up to $1.5 million or more!
Clearly, the price of living is not the only thing that people look for when they decide to move. They also look at key factors like the type of house.
The surrounding neighborhood, and the overall location of the house in relation to specific places such as Schools, Hospitals and Places of work
Of course, if you are a first-time buyer, there are also financial incentives that you would want to take advantage of.
The First-Time Home Buyer Act is designed to help qualified buyers lower their billable taxes. Eligible buyers can receive a credit that reduces their taxable bill by $15,000.
● You must be a first-time buyer to partake in this incentive program.
● Other programs among first-time home buyers include FHA loans, USDA loans, and VA loans, just to name a few.
Consider working with an agent specializing in the area you want to move to so that they can walk you through the local market trends.
Moreover you canstick to a budget and make it clear what you can afford so that you can avoid the feeling the fear of missing out and not feel pressured to panic buy.
● A big part of the home buying process is mental and behavior, so take your time when deciding.
What else can you do?
If you are just looking to get a good deal, then there are a few things to do.
- First, you should compare offers from multiple lenders to see which one is actually giving you what you need and not trying to add things you don’t. Taking the deal from only one is how some people end up overpaying on their mortgage.
-
Do your best to lower your risk factor; lenders prefer borrowers who are a safer bet, they want to have a better guarantee of getting their money back, and it makes it easier for you to get approved without too much fuss.
Cleaning credit report
One of the best ways to do this is to clean up your credit report and raise your score to a higher level.
a. Try to get a FICO score between 670 and 739. Of course, the higher your credit score is, the less interest you’ll pay on top of your mortgage.
- Putting up a larger down payment will aid in lowering your overall interest. This also shows lenders that you are serious.
Taking shorter loan terms can also help; for example, you might end up paying more on mortgage payments, but you’ll save on interest for a 15-year loan as opposed to a 30-year term.
Doing any or all of these steps could save you thousands or even tens of thousands over the life of your loan!
Conclusion
In the end, it is your choice where you want to live and buy your home. To help make that less intimidating, make a list of the things you absolutely need/want and a separate list of what you want but can compromise on.
Buying a home is no easy feat but painting a clear road map can help make the journey simpler.
