Over the past year, there has been a lot of uncertainty and sometimes intense competition in the real estate market. Some buyers have given up after too many disappointments, while others put off buying a home in the hope that things will settle down.
Regardless of your buyer status, you might be looking ahead to the new year to start your search for a home. It’s important to be prepared for all the opportunities and challenges that lie ahead.
Preparing yourself financially will be one of the most important aspects of your homebuying plan. While many potential buyers have a good grasp of the savings required for a down payment, they may not be prepared for the other expenses associated with homebuying, including:
- Earnest money deposit (EMD)
- Closing costs
- Application, origination, and underwriting fees
- Home inspection
- Pest inspection
- Moving expenses
Of course, one of the factors that has made the housing market so active over the past year and a half has been the record-low interest rates for home loans. These rates will be important to you as you plan to buy a home in the future. While they are not projected to rise significantly, they are projected to rise, so it’s important to gauge the impact that upcoming changes will have on your bottom line.
Remember that terms for your mortgage are subject to change depending on your financial history and creditworthiness. Your interest rate and approval chances can be affected if you have a lower credit score. To ensure there are no surprises, make sure you check your credit reports before making any necessary adjustments.
Be aware that a lower downpayment mortgage option could result in additional mortgage insurance and higher monthly payments. This should be taken into account when you are planning your homebuying budget.
Planning ahead for your home purchase gives you a great chance to do some research on your chosen neighborhoods. This includes the location of work and nearby amenities. It also includes tracking comparable property prices in your area.
Talk to a broker or real estate agent to establish a baseline of current comps and historical trends in the area you are interested in. There has been significant market movement in the last year and half with many home prices increasing at an unprecedented rate in many communities. A better understanding of the changes in home values over the last several years will help you to see the bigger picture.
In addition, you can work with a professional to create a targeted search that is based on your property preferences and neighborhood. This will enable you to identify new properties that meet your criteria and allow you to begin to understand how the values change over the coming months.
High inventory in real estate has driven home prices up in many areas, resulting in multiple offers on most of the new listings. These competitive situations may have caused you to temporarily halt your search for a home. If you continue to see low inventory levels in the months ahead, talk to a real estate agent about alternatives, including:
- Alternative neighborhoods
- Adjustments to your wish list
- Availability of fixer-upper properties
- New construction in your market
- Changes to your financing to make your offer more competitive
Wish List Creation
Once you have honed in on your chosen neighborhood and put together your numbers, it’s time to take a look at your wish list for your next home. It is possible that your preferences don’t match the homes in your area or that you underestimate the cost of certain bells and whistles. To ensure that your list is appropriate for the area and budget, it’s a good idea to speak with a broker or agent.
Remember, even though you might want a perfect situation that requires no repairs or modifications, it may not be possible in today’s market. Think about what you are willing to do before or after your move-in date. Consider your budget and determine if you have the resources to pay for any upgrades or updates.
In the end, it might be better to have some flexibility in your wish list. It’s not a good idea to ignore a fantastic property because it doesn’t meet all your criteria. Also, you don’t want a property that is too expensive when you can make minor improvements on your own.
The homebuying process can be mentally and emotionally draining, especially if you have had some difficulties in the past with a previous offer. These mindset shifts will help you have a positive experience.
- Instead of focusing on simple fixes such as paint colors or appliances, consider the bones of your house and the location.
- Remember to set a budget that makes sense for your lifestyle. If you spend a lot of money on entertainment and travel, then your budget for homebuying should not be too high.
- Understand that creating your home is a process that can take months or even years. It doesn’t mean you have to buy a new house and get two new cars. You can take your time, make the changes that you feel are important to you and not have to go through a major transformation.
- You know that there will be twists and turns in any worthwhile journey. Buying a home is no different. There may be setbacks and delays. You should prepare for these emotional setbacks in advance. And remember, the unanticipated is best.
A trusted real estate professional can be a valuable resource and will be there for you from the beginning to the end. Start early collaborating with an agent or broker so that you are better prepared for your 2022 home purchase.