The combination of rising interest rates, persistent inflation, and continued home-price increases means the start of a transitional period and lower competition in the housing market, predict economists including Lawrence Yun, chief economist at the National Association of Realtors. Don’t expect it to become an outright buyer’s market anytime soon, however. But if you are in the market for a home – you will face less severe competition, even less so after the summer buying season is over. If you are planning to buy in the next year, use this transitional period to your advantage to secure a great home at a fair price.
Here are some of the best pro-tips we’ve seen recently to help you on your way.
Enhance Your Credit
To secure a lower interest rate on your mortgage (and be approved by a lender at all), take the time to increase your credit score if you can. This is one of the top factors lenders consider.
Focus on paying bills in full and on time and keeping your credit utilization rate (how much you buy on credit as a proportion of your total spending limit). A year is plenty of time to boost your score measurably if you’re diligent “They’re one of the top things lenders consider.”
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 with a range of high-yield savings products.
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.
Look For Less Than Picture Perfect
Get your agent to include in your search houses that have been on the market for two or more weeks. These might have an issue or two that are off-putting to some, but are not a deal breaker and present an opportunity for you to negotiate.
Acting fast when you see what you like doesn’t mean you have to overpay. 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 norms in the neighborhood. If they are out of line, you may be better off walking away. When calculating affordability, also factor in money for ongoing maintenance and unscheduled repairs that are bound to pop up. Starting or beefing 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.
Plan For Your Tradeoffs
Make two lists: everything you want, and what you can’t live without and make compromises with these in mind. Trading off a parking space for a built in BBQ might seem tempting if you don’t have a car currently – but could be a bad move if you end up needing transport later on.
Expand Your Search/Approach
If you want to be a home buyer but can’t afford to buy a single-family house in your neighborhood of choice, get creative:
- Expand your search radius to other neighborhoods that might not be optimal but satisfy your basic needs
- Consider buying a two- or three-family unit property, where you live in one unit and rent out the others
- Buy with a partner or friend (be sure to sign a partnership agreement if you’re unmarried)
- Build a multi-generation household to leverage additional income (another growing trend)
- Buy an investment property while you rent to others (perhaps you can move into it later)
- If your job(s) are remote, consider buying a home in a vacation area you frequent
Be persistent and keep the long-term mindset. There will still be good opportunities in two, four, six months, so don’t be panicked into making a quick decision or purchase. Motivated sellers will still exist and your dream home is still out there. Top realtors tell us that persistence (in addition to planning) and the simple capacity not to quit if you have a run of bad luck is key.
Get Smart About The Process
Put together your home-buying team, including an experienced traditional real estate agent or exclusive buyer agent; if you’re buying investment property, add a tax expert and a real estate attorney. Your Credit Union owns its own mortgage company, Community Mortgage Funding (CMF). This means we can offer better rates, hand holding service and a dedicated, expert team including local-market realtors to help you safely navigate the home buying process. Check them out for candid advice and your best options.
P.S. We just introduced a “Combo Loan” (currently available in most states) which can help you secure a property with little or no down payment while avoiding the cost of potentially expensive private mortgage insurance.