This one goes out to those furiously hunting future homeowners. Forbes' Housing market predictions confirm what house hunters across the country already know—it's a competitive market for those looking to buy a home. And things don't appear to be changing anytime soon.
So what's a home hunter to do? Here are a few tips to help make the search a little easier, especially in these competitive markets.
Get Your Finances in Order
Whether you're single, married, or living with a domestic partner, homeownership these days takes saving for a down payment or a dual income to afford monthly payments. Skyrocketing rent, inflation, cost of living and student debt are all making it hard for everyone to save. Not surprisingly, the National Realtor Association reported that in a post-Covid market, 63% of millennials have no savings for a down payment.
If you're having trouble saving or finding money for a down payment, here is a list of things you can do to ensure you can financially make the move to home ownership:
Review your finances
What can you cut from your everyday budget? How much can you save toward a down payment each month? What payment can you comfortably afford as a mortgage payment when you do buy?
Check your credit report
Look for errors or past-due accounts. Generally, the higher your credit score the better interest rate you'll get on your mortgage.
Look for down payment assistance
First time home buyers can apply for down payment assistance programs if they have an income below a certain level. Talk to a loan officer to see what's available to you, and make sure to ask about our Smart Start mortgage.
Make a list of needs vs. wants
You may "want" 14-foot vaulted ceilings, but do you "need" them? What are your deal breakers? What can you compromise on? What are your "must haves"? This will help your agent pinpoint the homes you should see and save everyone's time and money.
Get your documentation ready
Mortgage lenders want to see bank statements from the past few months, among other paperwork. To learn more on this, check out our article How Banks Approve You for a Mortgage.
First-time home buyers' classes are widely available and often required by some mortgage lenders. They educate you about the process before you start jumping through the hoops and can even end up saving you money on your mortgage. Classes can range from $25-$125, run from four to eight hours long, and are offered online or in person.
Set a budget and stick to it
Sometimes realtors will show you homes above your price range, or you may be tempted to increase your budget, but don't let yourself get carried away. If you lose your job or experience a financial emergency and were already stretching yourself to make that monthly payment, you'll chance losing your home altogether.
Get Mortgage Prequalified or Credit Approved Before You Start Shopping
As a hopeful homeowner, this could be the biggest advantage you can give yourself. Although you may be confident that you'd be approved for a mortgage based on your steady employment, low debt-to-income ratio and credit score, the seller won't be aware of that unless you have the documentation to prove it. And in a hot market, not being prequalified or credit approved is almost certainly a deal breaker for sellers.
At WaFd Bank, we're a little different than most lenders—we offer a Pre-Purchase Credit Approval program as well as pre-qualification. Either can be a big advantage when shopping for a home, since you and the seller already know what your budget looks like and that you're a safe bet to buy the home (nothing is worse than jumping through hoops just to find out you can't afford the home you bid on). We keep every loan we make on our own books; we don't turn around and sell our mortgages to another bank or on Wall Street. As a result, we want to make sure that you've got a loan that makes sense for your financial situation before you start shopping for a home. To do this, our underwriting takes place prior to you making an offer. Learn about WaFd Bank home loans* when you're ready.
Find a Good Realtor You Mesh Well With
Regardless of age, looking at homes online is the first step. In fact, the National Realtor Association (NRA) found that buyers were more likely to walk through the homes that they viewed online. Most realtor companies automatically list all available properties on their sites, and many house hunters use sites such as Zillow and Redfin to preview the homes they want to walk through in person.
Regardless of what you find online, you'll need a realtor to help you gain the quickest access to viewing a home. Realtors often have insights to homes that have yet to list, and with most homes selling within two weeks of listing, a realtor can help you move through the process quickly and get your offer in front of the buyer. They can also assist you down the road with necessary steps such as making counter offers, getting a final inspection, understanding paperwork, and negotiating closing costs.
When interviewing a real-estate agent, it's good to find out how many other clients they are currently serving (for availability), their years of experience, and how long they have been in the local market. But ultimately, finding someone you can trust and understands your needs is the most important.
In a hot real estate market, properties will likely be moving throughout the year, but some months are more strategic to search than others. If you can, consider shopping during the fall and into holiday season, as many people wait until January or the spring to start looking.
Be Ready to Move Fast
This means both physically and financially. In a market like Seattle, where the average home was listed on the market for just a few weeks, sellers typically want to close a deal and move out quickly. Don't shop unless you're prepared to make an offer, because the house you love probably won't be there after you get a prequalification or credit approval in place. On the financial side, a credit approval will help you cut closing time significantly. The best way to buy a house is to start with your best offer.
Unfortunately, a hot market likely won't mean a "deal" for a buyer, and you may only get one chance to present an offer.
Make Sure You're Competitive Right from the Start
If you do find that dream home, then you may want to ask an experienced real estate agent to help you determine if an escalation clause would be advantageous for you. An escalation clause essentially states that you're willing to increase an offer up to a certain limit if other offers come in that match or top your initial bid.
Remember Bigger Isn't Always Better
During the pandemic, millennial home buying statics show that they began moving out of big cities and into less expensive suburban areas where they could find larger homes at better prices, but those trends are changing. Currently, millennial homebuying trends are skewing away from more deluxe homes in suburban locations. According to a 2021 NAR report, millennials were 82% more likely to purchase larger homes in need of remodeling or repairs (compared to boomers at 62%), but 1 in 4 millennials who did so regret it.
Unless you have a large family, or both partners are working from home and need office space, bigger homes mean more cleaning, furniture purchases, maintenance, yardwork, landscaping, and heating/cooling costs. While larger homes used to be a status symbol, about half of millennials are opting for smaller, more functional homes. So get your priorities figured out first, it will save you time and a lot of headaches.
If you aren't looking to remodel and want a newer home in a more urban setting that offers amenities, such as public transit, access to grocery stores, restaurants and bars, townhomes are a great option. While they aren't necessarily stand-alone structures, they do have shared spaces (like yards or driveways) with additional units. They host a smaller overall footprint on multiple floors but are built with more modern features and comforts and tend to be more energy efficient and sustainably built.
WaFd Bank is Here to Help
At WaFd Bank, we know navigating the buying and selling process can be tricky. We've been specializing in helping people achieve their home ownership dreams for over 105 years. To find out more, contact one of our neighborhood branch managers or call us at 800-324-9375.*Loans subject to credit approval and acceptable appraisal.