The road to homeownership is a complicated process. Be prepared to take your time when purchasing a home.
As you dive into the process of buying a home, remember that the current housing market is more competitive than ever. An ever-growing pool of buyers (many of whom are taking advantage of low-interest rates) continues to battle over a shortage of homes for sale, creating a lightning-fast market and high sale prices. First-time buyers, especially those searching for a starter home, should take special care to prep their finances so they can move quickly when they find a home that suits their needs.
Here are seven tips to help prepare first-time homebuyers like you for today’s fast-paced market.
1. Take your time
As the adage says, all good things take time and buying a home will likely be the biggest purchase of your lifetime. While you may get lucky and find your dream home (and also get an offer accepted) immediately, you should be prepared to spend several months searching for and closing on a home. The buying process includes these essential (and sometimes time-consuming) steps:
2. Gain financial footing
Financial experts recommend that you shouldn’t spend more than 28% of your total income on housing, but the numbers vary for each person and lifestyle.
When determining how much you can spend on your first home, begin by checking your debt-to-income ratio. This number estimates your ability to pay your mortgage (and other housing costs and recurring bills) when compared to your income.
Why is this necessary? Well, two potential homebuyers who draw the same annual salary (say, $60,000) may have significantly different recurring monthly payments and debts to pay down. One may be able to pay the mortgage on a $300,000 house, while another may wish to stay in the $240,000 range due to recurring payments on student loans, child support or other bills. While it’s smart to keep your housing payments below 28% of your income, knowing your debt-to-income ratio will help you make an even smarter budgeting decision.
3. Hire the right REALTOR®
Hiring a Realtor is an ultra-important step in the buying process. Agents help potential homebuyers in every market, but they are especially important when buyers need an advocate in a competitive market like we have today.
Since your Realtor will be with you through every step of the home purchase process – which may be slightly longer than usual given the current atmosphere – it’s important to work with someone you trust and are compatible with. Before committing to a Realtor, be sure to ask your potential agent these five questions.
4. Enjoy the hunt
Now for the fun stuff – the home search! Just 20 years ago, buyers had to search through thick listing books to find homes that matched their price and location. Luckily, your search can begin from your couch, the bus or while in line at Caribou Coffee.
Plus, the Edina Realty home search app allows potential homebuyers to search for properties and to save searches and homes that best fit your criteria. After saving homes or searches to your list, share your favorite home styles and neighborhoods with your agent.
5. Determine your must-haves
Unless you’re an extremely decisive person, you’ll likely find yourself falling in love with many of the homes you tour. While it may seem challenging to narrow down which home styles, features and locations you like best, this is actually a good thing. In today’s competitive market, it may be necessary to keep your mind open to a variety of home options.
Work with your Edina Realty agent to sift through which home features are just “nice to have” and which are requirements for your first home. Keep in mind, too, that some qualities can change. While a neighborhood’s walkability or proximity to the highway is set, you can always tear up old shag carpet and put in wood floors. If you find a great home that needs a few tweaks, read up on 203k renovation loans – they can help if you think a fixer-upper could be in your future.
6. Start touring and remain cautiously optimistic
Now that you’ve established your list of essential home needs, it’s time to attend in-person home showings. Today’s market is extremely tight, so it’s best to prepare for a few lost deals before you end up at the closing table. When you find a home that you’re interested in, be ready to:
- Make a fast offer (generally your best and highest).
- Compete in multiple offers.
- Potentially lose a home (or two, or three) before an offer is accepted.
- Have lots of patience, especially if you are buying at a lower price point.
7. Ask your agent about pre-list properties
When you work with an Edina Realty Realtor, you gain access to a large network of 2,400-plus agents and the properties they represent. That means you can find out about homes that might fit your criteria before they are even ready to come on the market.
When housing inventory is tight, having a large network of connections can increase your options and provide an expanded search. Take advantage of this network when searching for a home. Call the Betty Most Agency to get started today! (715) 821-6491