If you want to buy a house in the next 12 months – you’ll need some hard work and a bit of luck. But you can improve your help your chances of success, and your wallet, with a plan. Here are some tips with help from CNBC, Bankrate.com and Bobvila.com.
Enhance your credit
To secure a lower interest rate on your mortgage (and be approved by a lender at all), take the time you can to increase your credit score. This is one of the top factors lenders consider.
Focus on paying your bills on time and in full and on keeping your credit utilization rate (how much you buy on credit relative to your total spending limit). A year is plenty of time to boost your score measurably if you’re diligent.
Credit scores typically range from 300 to 850. While you don’t need a perfect 850 to get the best rate, the higher your score, the better: Buyers who took out mortgages in the fourth quarter of 2020 had a median score of 786, according to the Federal Reserve Bank of New York.
Research down payment options
You already know you need to save for a down payment―the rule of thumb is to put at least 20% down. But with many homes going for well over asking, often in all-cash transactions, you might need more. Your Credit Union can help sort out your best home-loan options and how to reach your savings goal.
In addition to high-yield savings accounts, we own our own mortgage company and will give you candid advice on your best options – including no- and low-down payment programs. We’re a not-for-profit financial organization, so can also offer very favorable rates and guarantee hand-holding service.
With the inventory shortage, chances are homes will continue to go fast. Many of the best deals may only be on the market a few hours to a day. The average home was listed for only 17 days throughout November, according to the National Association of Realtors. Watch new listings, including ‘coming soon’ listings, and be prepared not only to visit the home quickly, but to extend an offer almost immediately.
You’ll need to do all your research and preparation in advance, including pre-approvals, so you’re ready to pounce. And avoid being pressured into skipping safeguards like appraisals and inspections. You leave yourself vulnerable to expensive, unexpected repairs―and to overpaying.
Acting fast doesn’t mean acting on impulse and potentially overpaying. In the current market, highly overpriced properties are usually those homes that have been on the market for two weeks or longer. Compare the price of a property with those of comparable homes in the area. Also look at the price increase from a year earlier. If any of these numbers depart from the norms for the market or neighborhood, you might be better off waiting for the next property to come on the market.
When calculating what you can afford, it’s also wise to factor in money for ongoing maintenance and those unexpected repairs that are bound to pop up. Starting or topping up an emergency fund is worth considering. Your Credit Union has a super-high interest Rainy Day Savings account for this purpose. Check it out.