The housing market is roaring back in many areas, as increased demand and decreased inventory combine with very low interest rates to boost real estate sales. If you’re considering buying a home, a few tips can help.
• Know the market. Stay on top of new home listings by frequently checking real estate listings using online search engines. In a market where a home can have multiple offers, buyers must be ready to make an offer quickly. Think through the “must haves” of your future home instead of chasing features that might be nice to have but are optional.
• Show you are serious. Demonstrating that you’re prepared to close a purchase quickly can be an advantage in a competitive housing market. First, get a prequalification letter from your lender to show you qualify for financing. Second, when making an offer, don’t “lowball” the seller. Make your bid competitive and keep contingencies to a minimum, particularly if there are additional purchase offers. Sellers are looking for a worry-free, uncomplicated sale.
Try to be flexible on closing costs and dates.
• Consider all financing options. Consider putting 5 percent down so you have more equity and then continue building equity faster. Borrowers who have a down payment of less than 20 percent must also budget for mortgage insurance. Recent changes have made government-sponsored Federal Housing Administration (FHA) mortgage insurance more expensive, so private mortgage insurance may be the more affordable option. In most cases, borrowers can save more than $100 per month with private mortgage insurance instead of FHA’s.
Another consideration is policy cancellation. FHA no longer allows cancellation of mortgage insurance premiums for borrowers with less than 10 percent down, requiring them instead to pay premiums for the life of the loan. In contrast, private mortgage insurance can be cancelled once you’ve established 20 percent equity and loan payments are current, among other conditions. According to Mortgage Insurance Companies of America, 90 percent of borrowers cancel their mortgage insurance within 60 months. Check with your lender about all your financing options. Private mortgage insurance is available with down payments as low as 3 percent. Learn more at SmarterMI.com.
A strengthening housing market means today’s buyers are facing new realities. Before you buy, make sure you understand and address these challenges, so you can greatly increase your chances of getting into the home of your dreams.