The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Information on this website may not be current. This website may contain links to other third-party websites. Such links are only for the convenience of the reader, user or browser; we do not recommend or endorse the contents of any third-party sites. Readers of this website should contact their attorney, accountant or credit counselor to obtain advice with respect to their particular situation. No reader, user, or browser of this site should act or not act on the basis of information on this site. Always seek personal legal, financial or credit advice for your relevant jurisdiction. Only your individual attorney or advisor can provide assurances that the information contained herein – and your interpretation of it – is applicable or appropriate to your particular situation. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, contributors, contributing firms, or their respective employers.
Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them. Compensation is not a factor in the substantive evaluation of any product.
An overheated real estate market is never good news for buyers in search of a budget-friendly starter home.
But thanks to increased confidence in the economy, leading more people to make large purchases like new homes, that’s exactly the type of real estate market 2017 is ushering in.
According to a recent report from the National Association of Realtors (NAR), the share of households that believe the economy is improving soared to 72% in the first quarter of 2017. “Forty-seven percent believe that strongly, up from 45% in Q4 2016 and 44% one year ago in Q1 2016,” NAR said.
When there’s increased competition for homes, prices generally go up. (Go here to see how much house you can afford.)
A new report from Redfin bears this out, revealing home prices in February increased 7.2% from a year earlier. What’s more, homes priced for less than $240,000 witnessed the highest appreciation — skyrocketing 8.4% year over year in February and 100% since the market lagged in 2012.
Combined with a lack of housing stock — Redfin reports a 6.4% decline in new listings in February — and you have what might be a daunting buying experience for newcomers.
With that in mind, here are five tips from experts on how best to snag a starter home right now.
This may seem like less-than-helpful advice, but it’s the first suggestion most experts offer when discussing the predicament faced by first-time home buyers.
“You want someone who knows the neighborhood,” said Jessica Lautz, managing director of survey research and communications for NAR. “It could be difficult if you go it alone.”
Seek out an agent who is knowledgeable about the areas in which you’d like to search so you can help avoid these first-time homebuyer mistakes.
Before discussing the pre-approval issue, it’s important to sort out your finances and to do it before embarking upon a search.
This effort should include reviewing your credit score. If it’s less-than-stellar, you can reach out to lenders for tips regarding how best to improve it, said Boston-based Redfin real estate agent James Gulden. You can view two of your credit scores for free, with helpful updates every two weeks, on Credit.com.
“Sometimes people see their credit score and don’t know where to go from there,” said Gulden. “All lenders have different thresholds for what they’re willing to take on in terms of a buyer’s credit score. And they will also look at your employment profile.”
When you’re ready, it’s wise to obtain pre-approval for a mortgage before wading into the market. Not only will it ensure you lose no time when you’re ready to make an offer, it will help clarify what you can realistically afford.
Even seasoned, older buyers make compromises. Whether it’s the price, condition or amenities, compromising is part of the process.
“It’s more common for millennials to make compromises on first homes, but all buyers really do compromise on something,” said Lautz.
Translation: Figure out what you are willing to let go of or do without.
Buying a home is a process, no matter how much money you have. So mentally prepare yourself for the process, including the ups and the downs. Preparing for the downs includes not getting too attached to any one house.
“It’s easy to lose a couple and say, ‘Forget this, we’ll keep renting,'” said Gulden. “A lot of people are losing out on the first five or six homes they submit an offer on before being successful. From a mental standpoint, it’s very easy to get connected to a place, and when you don’t win a place, it can be upsetting. But in this market, it’s important to be able to brush it off and realize there are other places that will be coming onto the market.”
Gulden admitted this tip is not exactly novel, but it can give you an edge in a particularly competitive market.
Writing a personal letter to the seller, enclosed with your offer, can help set you apart when there are 10, 15 or even 20 more offers. And those numbers are no exaggeration, said Gulden, who recently helped clients submit an offer for a Cambridge property with 24 bids.
“If you don’t include a letter or something to differentiate yourself from others, then it’s all just numbers and dates on paper for the seller,” said Gulden. “Introducing yourself and telling the buyer who you are, why you like the property makes a big difference.”
Image: Tempura
December 13, 2023
Mortgages