The current real-estate market in 2021 is experiencing high demand but is lacking supply. Not to mention, the rise in mortgage rates and home prices are up by 8%!
The high demand and lack of supply in the market is because of the effects of COVID-19 causing interest rates to hit all-time lows. Moreover, the U.S. economy is currently having a more positive outlook since there has been some progress with the pandemic and the roll-out of vaccines.
So despite last year’s historically low interest rates, with the new progress being made despite COVID-19, it is expected that in 2021 interest rates will climb closer to average rates.
This can seem competitive and expensive. How do you ensure you get the home of your dreams while other buyers are eyeing the same house?
Don’t let that discourage you. Whether this is your first time buying a home or not, we’re sharing some tips to help you navigate this extremely tight housing market.
Some tips for buyers to consider when buying a house:
- Understand your loan options
- Bid competitively
- Know what you are not willing to compromise on
- Use a cash offer
Buying a home is an exciting venture and for many people it is a step to creating wealth or an investment. Keep reading as we go into more depth on these tips and how you can avoid making common mistakes so you can end up on top and get a great deal on a house this year.
1. Understand Your Loan Options
- We just touched on loans for covering certain costs, but it is very important that you understand the various types before choosing one.
- A conventional loan is very common and you’ll be able to buy a home with a minimum of 3% down payment.
- VA loans are only for veterans, members of the armed forces, National Guard, and their spouses. With this loan, you’ll have to meet service requirements and such, but you won’t have to make a down payment.
- FHA loans are less strict when it comes to your finances and credit score. The minimum down payment is 3.5% and your credit score can be as low as 580.
- Lastly, a USDA loan also doesn’t require a down payment but this is subject to income restrictions.
Each loan has different requirements so make sure you qualify before applying. Pre-qualification is an important step in getting an estimate on how much you can borrow, all based on your finances and credit history.
Pre-qualification can take some time and is less efficient in letting the seller know that you can afford the home. It doesn’t seem to sellers like you’re a reliable buyer and pre-qualification is purely informational in where you could start with loans.
If you want to be taken more seriously definitely try getting pre-approved instead.
However, since neither is considered a real commitment on the lenders part, sellers considering other offers will choose buyers that demonstrate that they can finance the property for sure.
Last year interest rates hit historic lows under 3% and while mortgage rates are inching higher.
However, there are some benefits of low rates. As a borrower, you’ll have the ability to get lower monthly mortgage payments and even afford more expensive homes!
Ultimately, the fluctuation of interest rates rely on how healthy the economy gets.
2. Bid Competitively
In the market’s current state buyers should be prepared for competitive bidding on a property.
To build successful preparation, a home buyer could benefit from doing research on local property values. It would also help to hire a realtor to consult.
These preparations can help ensure that you don’t overpay and that you’re bidding prices comparable to similar homes sold in the area.
Be ready to offer over asking price. Still, be careful: Just because it’s a sellers’ market doesn’t mean some homes still aren’t overpriced. With a real estate agent’s help, or by carefully examining nearby sales, do your best to independently determine a home’s true value before placing an offer.
In this market you’ll want to put your highest offer first, otherwise you could miss out on the home. Being flexible and less restricting with move-in dates and such can appeal to a seller more than the highest bid.
3. Know Where You’re Willing to Compromise
Sometimes when buying a home it is easy to think you have to spend out of your comfort zone to get the house you really want. That isn’t always the case.
You can find a house you love within your means. In this current market you may not be able to find the most perfect house and you should be prepared to compromise.
Having the willingness to buy a home without a pool, with fewer rooms or a home outside the city you originally decided on, can make the whole process smoother.
With the market currently being in favor of sellers, they probably won’t want to do much upgrades at this time. However, don’t let simple cosmetic changes get in your way of finding a suitable home. You’ll always be able to upgrade things later.
That being said, it’s recommended that you act fast and don’t go over budget.
This will save you in the long-run, so it would help if you made a list. Include all the things you really need in a home on one list and things that would be nice to have but not absolutely necessary in another.
4. Use a Cash Offer
A cash offer on a home is highly likely to beat other offers. In March 23% of homes were purchased without loans and with cash, that’s 4% higher than last year.
Most importantly cash offers let sellers know you have the funds readily available. Ultimately, you help the sellers avoid the financing contingency.
Cash buyers can waive appraisals and inspections which can be a bonus to sellers, thus, sweetening the deal.
Going this route as a home buyer gives you the competitive advantage needed in this tight market.
Be ready to act fast: To the swift go the spoils of today’s housing market. Buyers must be ready to jump to a showing or a new listing within hours. It’s common now for agents to open homes for tours — sometimes for as little as 15 minutes — and then ask for all bids after a day or two. If a buyer can’t make those tours, it’s unlikely they will get a second chance.
Make Your Home Buying Process Easier This Year
Let NVE guide you through the process of buying a home. Our team is dedicated to providing clients with quality service and protecting their best interests!
For more tips for buyers, feel free to contact us at New Venture Escrow today!