The country saw a surge in home sales even in the middle of the pandemic. The reasons for the surge were the low interest rates and the need for space among employees who were asked to work from home by their companies. But nearly a year after the surge, buying a house became challenging even though interest rates remained low.
So, if you are planning to buy your first home at this time, you should know what to expect before committing to the purchase. The housing boom caused a shortfall in the supply of houses and stricter mortgage requirements. While there were new listings that boosted the supply, buyers are competing with each other to get call the property their own. Here are the things you should expect when you are in the market for a house.
The low supply of homes during the pandemic showed a lot of buyers in the market. Reasonably-priced houses do not stay long in the market, especially if they are in good condition. The US housing market is a seller’s market at the moment, which means there are more buyers than the supply of homes.
With this in mind, you have to be flexible and make concessions to get the house you want. If the house you are eyeing is beyond your budget, then you’ll have to look for something else. You can also work with a real estate agent to help you make a strong offer for a home within your financial reach.
Increase in Prices
Since it is a seller’s market, you should also expect home prices to increase. The S&P CoreLogic Case-Shiller home price index showed an increase in prices by around 12 percent over the past year. This is the biggest increase in over a decade. The index also showed a monthly increase of around 1.2 percent. The Federal Housing Finance Agency also showed an increase of 12.2 percent in home prices over the past year with a monthly increase of around 0.9 percent.
Industry watchers expect prices to continue going up in 2021 but at a slower rate. Taking this into account, you may want to bide your time, especially with the entry of new listings in the market. You might reach a point where the home prices are affordable for you and get the house you want.
Low Mortgage Rates
Low mortgage rates were one of the reasons for the housing boom during the pandemic. While they have gone up a bit recently, they are still lower compared to the period before the pandemic started. Despite the low interest rates, you should still shop around for the best rates offered in the market. The rate you will get depends on the lender and the state of your finances. So, you should get in touch with different lenders and compare the rates they are offering.
Shop for Lenders
Before making plans for buying a house, you should check your finances and make sure your credit reports are accurate and in good order. You should also know your credit score before you even look at the marketplace.
Once you have the information you need, you should look for a reliable mortgage lender before looking for a house. You should check if your finances are good enough to get a good rate when you find a house that you want. You wouldn’t want to find out later that your credit score does not qualify you for a loan to get your dream house.
Getting a mortgage preapproval gives you the price range of the houses you should check. The preapproval depends on specific conditions that the lenders may have. While it is not yet an approval for the loan, it will give real estate sellers the idea that you are seriously considering buying their property.
Tight Credit Requirements
You should also remember that the credit requirements for buying a house are still strict. Most mortgages require a credit score of at least 620. Federal Housing Administration (FHA) loans and other government-backed mortgages may have lower credit requirements. But the down payments are typically higher. For instance, if you have a credit score of 500, you will have to pay a down payment of 10 percent. On the other hand, a credit score of 580 requires a 3.5 percent down payment. You should also consider that the lender will require primary mortgage insurance if your down payment is less than 20 percent.
Buying a house is not as easy as people think. They have to consider a lot of factors. But once they covered all these factors, they may be on their way to buying the house of their dreams.