Written by Zarine Torrey - Mortgage Branch Manager, Evergreen Branch
Everyone can agree that the 2023 home buying market is not like past years. Is it a good time to buy? Mortgage rates have gone from 3% to 7% and people are talking about a housing bubble. It’s a unique market. Lack of inventory and mortgage rates are the biggest obstacles for many buyers, and this is making it a sellers’ market. So how can you prepare and compete?
First step is to get your finances in order:
How much money can you put towards a down payment?
- Will that money come from a liquid asset such as your checking account or a 401K?
- Do you have a family member that is willing to gift you money to purchase your dream home?
- Will the seller pay some of your closing costs? Don’t forget to have a cushion in the bank for ongoing or unexpected costs.
What is your budget?
How much of a payment can you afford based on your income and other expenses?
Review your credit report and correct any errors. Make sure your credit score is where it needs to be to qualify for a mortgage. For a conventional, USDA or VA loan, you need a minimum score of 620. For FHA, a minimum score of 580 and for some down payment assistance programs like MSHDA, you need a FICO score of 640. You can obtain your credit report from each of the three agencies for free once a year.
If you can, work on lowering your monthly debt payments so you can afford more of a home. Reducing your debt can also increase your credit score and reduce your debt-to-income ratio. Lenders offer the best rates to borrowers with high credit scores and low debt to income ratios.
Second, educate yourself on different mortgage products:
You don’t need to put down 20% to buy a home. There are many first-time homebuyer programs that allow less down. Conventional has max financing of 97% LTV and FHA 96.5%. If you qualify, VA and USDA offer 100% financing.
There are also different mortgage terms. Most people lean towards the 30-year fixed, but there are other options such as a 20 year and 15 year fixed and adjustable rate mortgages. Different terms have different benefits such as a lower monthly payment or a lower interest rate. Weigh your options.
Make your best offer!
Sometimes its not always about the money. Consider offering to the seller a flexible closing date or allowing the seller to vacate after the closing so they can prepare to move into their next home.
We would not recommend waiving the inspection. Having an inspection before you go 100% into the purchase allows you to find out if there will be any future immediate costs of the home and will also give the option to back out or negotiate the purchase price.
Most importantly, don’t give up! Buying a home is a process. Its your time to explore what is out there and to understand what makes most sense for you at this time in your life.
Enjoy the experience!