The arrival of Spring means the beginning of the real estate market's busiest season. It is the time of year when sellers begin to list their properties, and eager homebuyers accelerate their house-hunting process.
Last year was no exception. The 2021 housing market saw extremes, with mortgage rates at historic lows and home prices soaring with surging demand from homebuyers. Many projected that 2022 would return normalcy within the market, with home price growth decelerating.
Zillow and Fannie Mae recently adjusted their initial 2022 predictions to represent the market's continued growth in home prices. Homebuyers will likely face stiff competition as prices rise and the shortage of available homes continues, leading some buyers to get priced out of the market.
If you are a homebuyer poised to find a home this year, proper preparations are essential when navigating the housing market. Here are some tips to put you in the best position to purchase a home this season:
1. Know How Much You Can Afford
Determining your budget does not have to be daunting. Start by identifying the following:
- Money saved for the down payment
- Household income
- Current amount of debt
- Recent credit score
These factors determine interest rates; the amount lenders will loan, and the monthly mortgage payment. This overview of your finances provides a better idea of affordability and enables you to effectively search through listings by filtering out properties beyond your budget.
After establishing your financial baseline, account for the additional expenses that come with buying and owning a home beyond your monthly mortgage payments. Closing costs, moving expenses, homeowner’s insurance, and utilities also need consideration. Prepare for the future by setting aside funds for regular maintenance and emergency repairs once you own your home.
2. Get a Preapproved Mortgage
A mortgage preapproval is a document provided by a lender stating how much money they will loan for your home purchase. Your financial profile determines the loan amount; this includes income, debt, and credit score. The preapproval signals that the lender is ready to move forward with your loan, assuming your financial situation does not change drastically, and the home appraisal comes back without any notable discrepancies.
Unless the buyer purchases the home in cash, many sellers will not consider offers from potential buyers who do not have preapproval from a lender.
3. Set Your Priorities
Finding a home that has all the features you desire is tricky in any situation. Most homebuyers will have to make concessions to secure a home within their budget. Purchasing during the current strong seller’s market adds another hurdle to the homebuyer, so it is essential to prioritize needs against wants for your new home.
Make two lists to organize your needs versus wants. The “needs” list should consider the factors that are harder to upgrade, such as the number of bedrooms or the neighborhood. The "wants" list should incorporate cosmetic features such as countertops or carpets, which are simple to alter after purchase. Determining needs and wants will ensure you make an offer on the right home that fits your lifestyle needs.
4. Find Your Agent
For many homebuyers, their real estate agent is the primary person guiding them through the home purchasing process using their experience and professional expertise. Find a real estate agent you trust and who understands your needs. Research agents in your area and ask for referrals from friends or family who have recently bought a home. Conduct a brief interview with potential agents to decide if they are the right fit.
By completing the above preparations, you will have a good idea of what you want from your new home and what you can afford. If a potential bidding war develops, refer to these resources to make a sound decision on your future home.