Do these 4 things…
Alicia Adamczyk, of the CNBC Make It Newsletter, breaks down the four most important things potential home buyers should be doing.
1. Improve 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.
You can do that by focusing on paying your bills on time and in full and on keeping your credit utilization rate low.
A year is plenty of time to boost your score a few points if you’re diligent.
2. Research down payment options
You already know you need to save up 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’ll probably need to save a lot — potentially more than 20%, depending on where you want to buy. But you don’t necessarily need to do it all on your own. There are plenty of federal, state and local programs to help first-time homebuyers. One example: Freddie Mac’s Home Possible, which helps lower-income borrowers buy a home with as little as 3% down.
3. Be nimble
With the inventory shortage, chances are homes will continue to go fast, says Glenn Phillips, CEO and lead economic analyst for Lake Homes Realty. Many of the best deals may only last a day or a few hours on the market, he says. The average home lasted 17 days on the market throughout November, according to the National Association of Realtors.
4. Don’t overpay
Acting fast doesn’t mean overpaying, though. “Buy competitively, but still be prudent,” Phillips says. “There are home sellers who are pricing at such a high price that only suckers will buy.” In the current market, these are usually the homes that have been for sale for two weeks or longer. “These are homes where the home buyers and their agents recognize the home is grossly overpriced and are now avoiding it.” Compare home prices from the prior year in your local area. If a seller is listing the same type of house for significantly more, you might be better off waiting for the next property to come on the market.
If you want to buy a house in the next year, be prepared to save up and act fast. The housing market has been red hot for the past 18 months,
with buyers sometimes opting to skip many of the traditional strappings of the process, such as appraisals, inspections or even seeing the house
in-person before making a deal.
Things aren’t quite as crazy as they once were, but prices remain sky-high, inventory is low and homes are still going fast. Those trends are expected to continue into 2022. To get ahead of potential competitors, you will, of course, need to save as much as possible and research your options before placing an offer.