How to Prepare to Buy A Home in 2021

Man sitting at desk smiling at laptop computer screen

So you want to buy a home. But how do you prepare for the crazy competitive seller’s market we’re currently in? And what is a seller’s market, anyway? A seller’s market refers to when the real estate market has more buyers than sellers. So how can you prepare for this market to make sure you have an edge over your competition?

Get to know your finances. 

It’s important to know where you stand with your finances. While there are many aspects of your finances you should be aware of, we’re going to focus on three components: Credit Score, DTI, and savings.

Credit Score

Your credit score is important. Mortgage companies use it to help determine how much it will cost to borrow money for your home. Sometimes a few points on your credit score can impact your monthly mortgage payments, so you want to make sure you’re credit is in tip-top shape before you apply for your mortgage.

For example, most lenders use the FICO credit score. If you’re at 800 or higher, you’re considered to have exceptional credit, while 579 or lower is considered poor credit. There are plenty of ways you can work on improving your credit score prior to applying for your mortgage. Check out this blog for more: https://www.bankrate.com/mortgages/how-your-credit-score-affects-your-mortgage-rate/.

DTI Ratio

You also want to familiarize yourself with what your estimated DTI is. What is DTI? It stands for debt to income ratio. It’s another factor that mortgage lenders use to determine your rates. To calculate a DTI estimate: (Monthly debt/current monthly gross income) X 100. You can also find plenty of DTI calculators if math isn’t your favorite subject.

A DTI of 20% or less is what the Federal Reserve considers a low DTI. A DTI of 40% or more is considered high and could be signs of the borrower being someone who has signs of financial stress.

Savings

How much cash you have saved up for your home is important. Transaction costs can include money for your earnest money deposit, money for your down payment, and money for closing costs. Outside of the transaction, you’ll also need to consider things like moving costs (storage space rentals, boxes, tape, truck rentals, moving companies, etc.). It’s important to be aware of these costs and how much money you have for them before you apply for your mortgage.

Gather paperwork ahead of time.

You’ll want to gather your paperwork before you start your home search. This helps you from scrambling last minute to find something important that could delay closing. Financing issues account for 37% of delays to the closing table (according to NAR). To avoid any delays in getting your dream home, make sure you have all these documents available.

Important documents include: Pay stubs, W2s, 1099s, bank statements, gift letters (if applicable), address/rent history for the past 2 years, employment history, proof of any other income, Child support/alimony, debts like car loans, current home mortgage, credit cards, student loans info, non-liquid asset info like life insurance, debts, and information on stocks & bonds.

Ask questions and get answers.

Man and woman in cafe looking at computer screen together.

When you’re looking for a real estate agent, be sure to ask questions. Your agent is your partner and home buying resource throughout this home buying experience, so you’ll want to make sure they are a good fit.

Ask agents about their communication preferences, familiarity with your area, and how long they’ve been in the industry. Your agent should be able to have a dialogue with you to make sure that you both have the same expectations.

Do a little detective work.

Your agent can be a great resource, but you should always do a bit of research on your own to determine what it is you want in your future home. Ask yourself if you’re looking for your “starter home” or if you’re ready to find your “forever home.”  Look at neighborhoods and what style of home you’re interested in. Decide what’s important to you in a new home, whether it be your morning commute to work or proximity to nearby amenities.

It’s also important to determine what you want vs. what you need in your future home. What features do you absolutely need to have in order to live your day-to-day life, and what features would be nice to have, but not a necessity? Check out our blog on wants vs. needs to determine what your list looks like: Wants Vs. Needs

Make sure you get pre-qualified for your mortgage.

Pre-approval in today’s market is not only a suggestion, it’s often a requirement. Pre-qualification is important for all potential buyers. You can even check out HUNT Mortgage’s Pre-Purchase Commitment program, which is a great way to show a seller you’re serious about your offer. It provides a fully underwritten commitment, subject only to collateral conditions and to reassure sellers, HUNT Mortgage backs its commitment with a $1,000 guarantee*. If a buyer does not close on a transaction due to the buyer’s mortgage application failing, we will pay the seller $1,000. The guarantee distinguishes HUNT customers from other buyers a seller may be considering.

Buying a home can be intimidating, especially when you’re a buyer in a seller’s market. However, with the correct preparation and agent, you can make the entire experience less stressful, and even enjoyable. While it is a red-hot market, there’s still plenty of opportunities for you to find your perfect home.


Disclaimer: *The guaranty is null and void if:  a) The property is not deemed acceptable collateral for the loan due to value and or condition; b) The buyer or seller willfully cancels the transaction; c) The buyer voluntarily terminates employment and or voluntarily divests assets prior to closing; d) The buyer takes out new credit after the Pre-Purchase Commitment is issued; e) The seller is unable to deliver clear acceptable title;  f) Guaranty is only on owner occupied single family transactions; g) The transaction does not close due to a contract contingency not being met other than the mortgage financing; h) Pre-Purchase Commitment was issued with maximum specific sale price and taxes, guaranty is void if either of these are exceeded; i) The contract closing is dated past the expiration of the Pre-Purchase Commitment. Guaranty is only on Pre-Purchase Commitments issued by HUNT Mortgage


Buying a House: Working With a Real Estate Agent to Make an Offer

When making an offer, a real estate agent brings some pretty powerful assets to the table: market knowledge, objectivity and (hopefully) some well-honed negotiating skills. Buying a house is emotional, and your agent can help level the field by bringing a more rational approach to the transaction. Here’s how the two of you can work together to get the best possible deal.

Don’t ignore the market

When it comes to making an offer, it’s more important than ever to consider a home’s value — which might not be the same as its listing price. Carefully study the comparative market analysis provided by your real estate agent. When researching the home and neighborhood’s value online, compare the estimates provided by Zillow, Trulia and Redfin, which can range widely.

Your agent will help you interpret the data and establish a fair offer price.

Work with a Real Estate Agent to Make an Offer

Staying sane in a seller’s market

If you’re buying a house in a hot market, it’s easy to get caught up in auction fever. Your agent can help keep you focused only on what you can control. If a number of buyers are interested in the same home, make your first bid your best offer.

If you’re really motivated to buy a particular property, consider putting together two or more offers in advance. That way, if there are no competing offers, your agent can submit the lowest. The higher offers can be the go-to bids if there’s a crowded field.

Find out why the seller is moving

The seller usually wants to sell as much as, if not more than, you want to buy. He has just one house to sell; you have a market full of opportunities. Of course, this is less of a factor in a strong seller’s market where inventory is low. But if the seller has already signed a contract on his next home, or if there’s a divorce in the mix or a job relocation timetable in play, that’s all good information to have. Have your real estate agent do as much recon as possible.

Keep the contingencies in check

In competitive real estate markets, contingencies can be deal killers. When it comes to conditions, get creative. Forget the little stuff and concentrate on major issues that must be addressed — and offer alternatives.

For example, if an inspection reveals necessary repairs, ask for a credit adjustment to be applied at closing, rather than putting the onus of contracting and completing the repair work on the owner. Anything you can do to ease the sales process and shorten the time to loan closing may work in your favor.

Make sure your agent is a strong advocate

Ideally, your buyer’s agent is both a master negotiator and your biggest advocate. For sellers, it’s not always just about the money. If your agent is singing your praises (you’re preapproved, love the neighborhood, offering a bigger down payment), you might score the edge in what would have been a tie. Personalities play a part in any human interaction.

How a seller is treated — and how a buyer is represented — can often make or break a real estate deal. Make sure your agent is at least pretending to be your biggest fan.

If it’s a no, move on

Having a deal go south on you is going to hurt. You can wallow in your disappointment for as long as you want, or for about an hour — whichever comes first. Think of it this way: You’re not starting over; you’ve already eliminated a lot of the variables. You know how this whole thing works now. It’s just a matter of finding the right house.

But first, if you lost in a multiple-offer situation, see if your agent can get your bid in a backup position. Deals fall through, and if the accepted offer does crater — because of a loan snag, a broken contingency, whatever — you might be in a prime position to rescue a sale.

In the meantime, in addition to revisiting your house runners-up, consider asking your real estate agent to gather up some older or expired listings. Many buyers neglect this segment of the market. If a house has been on the market for a while without selling, you’ve got some leverage, perhaps even a motivated seller.Find the Best Real Estate Agent

Getting the deal done

Congratulations! You finally have a signed contract in hand and can almost smell the green grass (desert blooms, pine-covered mountains, salty sea air — fumes of rush-hour traffic?) of your new neighborhood. You’re like a long-distance runner stretching for the finish-line tape. It’s time to move from deal making to loan closing.

Hal Bundrick is a staff writer at NerdWallet, a personal finance website. Email: hal@nerdwallet.com. Twitter: @halmbundrick

This article originally appeared on NerdWallet.


Buying a Home in The Winter

Roof with brick fence covered in snowflakes

Ready to get a jump on the spring market? Look for your new home now during the winter months. Buying a home when the snow is falling can be beneficial to you as a buyer. It can even potentially save you some money. Here are 4 reasons to buy a home in the winter.

There are plenty of homes on the market in winter.

We’ve said it before: with technology, there is no off-season for real estate. In fact, “almost a million homes were sold in the US last winter (973,000 from Dec 2018-February 2019).” So there will be plenty of great homes available to buyers during the winter months.

While the quantity may be lower than the spring/summer market, you will still have great options available to you.

You’ll have fewer offers to compete with.

Winter weather keeps some buyers away from the market until the snow and ice has melted. This means there will be lower demand and fewer buyers to make offers.

We aren’t saying you’ll be the only person to place an offer on a home, but you may find yourself in a smaller pool of offers. This can work to your advantage and keep you from engaging in a costly bidding war.

You’ll see how the home holds up in bad weather.

It is easier to inspect the exterior of a home in the spring or summer. But winter will show how well the home performs in snow, sleet, ice, and cold. You’ll be able to see leaks, discover how the insulation performs, and find any heating problems.

Motivated sellers could help save you money.

Many homes listed in the winter because of a major life change. And while this doesn’t mean you’ll get a home for a severe discount, it may save you a few dollars. According to Trulia, buyers saved, “an average [discount] of 6.1% on home prices, the highest discount through the year.”


While it may be a cold outside, the real estate market is still hot! If you’re ready to start looking for your home now, check out homes for sale page to see all of the great homes available now.


5 Questions to Ask At Your Next Open House

Red white and blue Open House Flag

Are you ready to attend an open house? Here are a few questions you should be asking the listing agent while you’re at an open house:

  1. How long has this house been on the market? It’s always good to know if a home is new to the market or has been sitting for a while. It can help inform your agent for negotiations.
  2. Why are the sellers moving? This can offer some insight into the home. Knowing why someone is choosing to sell could be helpful for both you and your agent.
  3. What (if any) updates have been made to the home? This can be important for you as the home buyer to inspect the work. They should be able to provide any permits for those updates (if required).
  4. What is the neighborhood like? The listing agent should be able to give you an overview of the neighborhood and what it’s like.
  5. Are there any offers on the home? If there are offers already in on the home, you’ll have to decide (and quick) if this is a home you’re interested in.

Asking a few questions can give you useful information to determine if a home is right for you.

Interested in checking out some homes in the evening? Don’t miss our Twilight Open House Tours happening Wednesdays this summer. Our next Twilight Open House event is happening Wednesday, June 19 from 5-7PM. Check out all the open houses here: Twilight Open House Tours.