Purchasing a residential property, especially for the first time, is among the most meaningful moves one can make. However, it can also be the most complicated given how challenging the current real estate market is.
We have started heading into another peak homebuying season. Forbes states that homeownership is still beyond the reach of many. The same could be attributed to high mortgage rates and low housing stock.
Besides high mortgage rates, the other issues may persist in 2024. The trend of softened sales volume will only flip with a dip in mortgage rates. First-time homebuyers can navigate this challenging market with certain strategies. In this article, we will discuss three useful tips for the same.
Get Things in Order Before Entering the Housing Market
The age-old concept of sharpening the axe for hours before striking the tree is relevant to homeownership. In other words, you must step foot into the housing market only after careful preparations. Yes, we are discussing the financial aspect since a home is a major investment.
Let’s look closely at some areas to take care of before entering the housing market.
Tackle Any Outstanding Debt
Lenders will be willing to make good mortgage offers to those with a solid credit score and debt-to-income ratio. Start by reviewing your current finances, verifying the credit report for any discrepancies, and tackling any outstanding debt.
For instance – a high-interest credit card debt must be closed first. As your debt-to-income ratio improves, your credit score will automatically rise. You may even be offered lower interest rates as a result.
Save for a Good Down Payment
The simple logic is that the more you can pay as a down payment, the more you can save in the long run. So, how much down payment should you pay? The answer to that depends entirely on the type of your mortgage.
An ideal down payment would be at least 20% to get lower interest rates and reduced monthly installment value. However, there are options available where even a 3% down payment would secure you a mortgage.
Get Pre-approved for a Home Loan
This is another thing to sort out before entering the housing market, especially if rates in your area are closer to the national average (7%). An example would be the Charlotte region of North Carolina.
Home sales continue to see a downward trend owing to interest rates in the 7s. This means first-time homebuyers must be strategic while applying for Charlotte home loans. Apply only when you’re confident of your credit score.
According to TruLoan Mortgage, different types of mortgage options are available for home purchase and refinancing. Take your time to understand them to get the best deal. Also, compare interest rates between lenders before selecting any.
Start Your Home Search on the Right Note
Once you are mentally and financially prepared to purchase your first home, it is time to dive into the heart of the process. Here are a few ways to ensure your home search mission becomes successful.
- Clearly distinguish your needs and wants to avoid blowing up your budget. Look for ideal home options online, at local open houses, through a trusted realtor or broker, etc.
- A wise choice is imperative in terms of the real estate agent. Think of someone who knows the industry like the back of their hand due to years of experience. Ask friends and family for recommendations and shortlist a few options. Assess each realtor for industry knowledge and responsiveness before zeroing in.
- Understand that you do not need to commit yourself to a property that has an owner. The truth is that nearly one-third of homes in today’s market are newly constructed. Their builders will likely offer attractive incentives like covering for closing costs. At the least, you won’t have to worry about upgrading anything in a new property.
Pay Equal Attention to Closing on an Offer
You want to put your best foot forward while locking in and closing a home offer. In other words, make your best and highest offer quickly to stay competitive in today’s challenging housing market.
To close your home purchase successfully, you must negotiate closing costs. These include, but are not limited to, title insurance, lawyer fees, and taxes. Notwithstanding that these costs are generally 2% to 5% of the total loan amount, you may get a concession. This holds in today’s market where builders are willing to push over the line to encourage a purchase.
Other ways to navigate the closing process properly include –
- Scheduling a home inspection to understand the current status of the property. For instance – you don’t want to move in only to find out that the property has major plumbing issues.
- Booking an appraisal, which your lender will require to verify the offer price. Essentially, lenders want to know if the final price is an accurate reflection of the property’s worth.
- Finally, you must invest in a good homeowners insurance policy to stay covered against any losses or theft. The latest data reveals that homeowners spend an average of $1428 for a $250,000 property. The premium installment will be another expense to factor into your monthly budget. Try to look for bundling services with the same insurance company that covers your vehicle.
Finally, make sure you have a cashier’s check ready to pay the closing costs since a personal check won’t work. By this time, all the necessary paperwork must be in order so the property can officially become yours. Even the title company must verify your identity with photo proof.
Then, all that is left to do is give yourself a round of applause as you receive the keys to your home! After all, navigating the housing market in 2024 successfully is an accomplishment worth celebrating.
