SHOULD I BUY A HOUSE RIGHT NOW?
There has never been a house buying market like this one. The ongoing COVID-19 pandemic has made 2021 a singular time to become a homeowner if that is one among your goals this year. Mortgage rates are still near record lows, and work-from-home policies mean buyers have more flexibility to settle on where they will live. However, high unemployment and an uncertain economy could make it hard for a few buyers to get financing. If you are wondering whether it is the right time to buy a house, ask this instead: Is it a good time in my life to buy a house?
Current economic pointers and the state of your local housing market give important context for your decision. However, whether this is an honest time for you to buy a house also depends on your financial situation, life goals, and readiness to become a homeowner.
So, is it time for you to buy? Here is what you need to know.
THE 2021 HOUSING MARKET: A SUMMARY
Interest rates plummeted to historic lows last year, and they will likely remain low for a few years.
That is great news for borrowers it means lower monthly mortgage payments and larger home-buying budgets.
However, low rates have also created more bidding wars and driven home prices up. There are fewer houses on the market and house hunting has become more competitive.
You will likely need to move fast when you find your dream home.
In addition, you need to find out before time what proportion over the selling price you’re willing to pay if it involves that.
Low-interest rates can help buyers afford costlier homes. But they also create more struggle in the market.
The massive move to work-from-home may also have you thinking about an area with enough space to accommodate an office, or just opened up now that everybody works, studies, and socializes from their living rooms.
Work-from-home policies have given many of us the liberty to reconsider where they live, allowing them to relocate to less costly or otherwise more desirable areas without sacrificing their jobs.
Whatever your reasons for entering the housing market, 2021 might be your year to become a first-time buyer.
CURRENT MARKET ADVANTAGES FOR HOME BUYERS
Mortgage rates are at historic lows lately, which makes buying a home cheaper than when rates are higher. The average rate for a 30-year fixed-rate mortgage was 2.94% in May.
CURRENT MARKET DISADVANTAGES FOR HOME BUYERS
Here are the tasks or challenges you’ll face in today’s market.
COMPETITION AMONG BUYERS
Demand for homes is high, but inventory is low, making this a sellers’ market in many areas of the country. A sellers’ market happens when there are more prospective buyers than homes for sale.
The stiff race for homes means fewer choices, higher prices, and quicker sales. Eighty-eight percent of existing homes sold in April 2021 were on the marketplace for a month. The standard time on the market was just 17 days, down from 18 days in the previous month and 27 days in April 2020.
HIGHER HOME PRICES
The median existing-home price reached a historic high of $341,600 in April, up 19.1% from April 2020, consistent with NAR.
STRICT LENDER REQUIREMENTS
After the COVID-19 pandemic began, lenders set strict standards for mortgages. Although mortgage lending standards have loosened a bit recently, they haven’t yet returned to pre-pandemic levels, consistent with the newest Mortgage Credit Availability Index from the Mortgage Bankers Association. Strict lending standards mean it’s going to be harder to qualify if you have a lower credit score.
Of purchase loans that closed April 2021, 6% were for borrowers with credit many 600 to 649, consistent with ICE Mortgage Technology, a mortgage data provider. But 1% of purchase mortgages that closed in April were for borrowers with credit scores under 600.
YOUR READINESS TO SHOP FOR A HOME
Ask yourself these inquiries to explore whether you’re able to buy a home.
PREPARED TO PLACE DOWN ROOTS?
Think about your life goals, relationships, and interests. How long are you able to see yourself living in this location?
Ideally, you want to stay in the home long enough for rising property values and your equity to exceed the prices of shopping for and selling, including real estate commissions and mortgage closing costs. That will take several years.
You could also be subject to capital gains taxes if the house appreciates and you sell it in less than two years.
HOW’S YOUR JOB SECURITY?
A mortgage is a big commitment and may become a stressful burden after employment loss, so it isn’t a good time to shop for a home if you think that you will get laid off.
Wait until your employment is stable before thinking about buying a home.
ARE YOU FINANCIALLY PREPARED?
Here are the three main ingredients to evaluate:
You’ll need money for a deposit and mortgage closing costs, and for moving and other expenses after you purchase the house. The deposit requirements vary by the kind of mortgage and therefore the lender. The more you set down, the lower your monthly mortgage payment.
Lenders generally offer the simplest mortgage rates and terms to borrowers with credit scores of 740 and above, although you can qualify for a mortgage with a score in the 600s. The choices are much slimmer with a score in the 500s.
The average FICO credit score for closed mortgage loans in March 2021 was 747, down slightly from a mean of 749 in April 2020, consistent with ICE Mortgage Technology.
If your credit is marginal, it might add up to postpone buying a house and use the time to figure on building your credit.
Lenders check out your debt-to-income ratio, or DTI, to determine whether you qualify for a mortgage. Your DTI is that the percentage of your monthly gross income that goes toward monthly debt payments, including housing costs, also as car, student loan, Mastercard, and other debt obligations. Lenders want to see a DTI of 36% or below. The lower your DTI, the higher your chances of qualifying for a mortgage.
THE BOTTOM LINE
If you decide that now is the right time, knowing the steps required buying; a home is your first order of business. This includes deciding what proportion home you will afford, finding the proper loan program, and being preapproved for a mortgage before shopping around and making an offer.
This all goes hand in hand together with your credit score, which directly affects your mortgage costs and rate of interest. Izabella Lipetski the top real estate agent in East Bay California will be happy assist you in the whole process of buying a home right now. Contact her right away to get the most out of this amazing situation.