Home buyers have faced many challenges recently as people across the country are struggling to buy a home. Low housing inventory has forced buyers to put bids on the same homes which raises the prices on a national level.
Not only are home buyers struggling to purchase a home because of the low inventory and high prices, they are struggling because of the increased purchases of single-family homes by institutional investors as well as challenges in the supply chain resulting in increased costs for materials and fewer new homes.
The median sales price for single-family homes in the first quarter of 2022 was $428,700. This is a 16% increase from the first quarter of 2021. Median home sales are more than six times median household incomes. The 30-year fixed mortgage average rose more than 2% between June 2021 and June 2022.
Although these numbers can seem a bit intimidating, don’t give up on your dream of being a homeowner. If you are hoping to purchase a home, here are some tips from the American Bankers Association to ensure your experience goes smoothly:
1. Gain speed with bank lenders
Be prepared for the house-bidding process. Get pre-approved for a loan so you can quickly and effectively bid on your dream home. Getting preapproved allows you to know exactly how much mortgage you can carry as the lender will consider your debt payments, income, and credit score.
2. Fix financial flaws
Clean up your credit and pay down your debt. If you address problems early, you are more likely to qualify for a better interest rate.
3. Build Your Savings
Down payments for first time homebuyers generally range between 6-7% on average. However, offering a larger down payment helps you build equity faster, reduce monthly payments, and eliminates the need for private mortgage insurance.
4. Understand your local market
Once you know what you are looking for, research what similar homes have sold for in the past six months.
5. Set a realistic budget and stick to it
You might not be able to afford everything on your wish list so consider what you absolutely need in a future home and where you can make concessions. Based on your current financial situation, determine how much you can realistically afford.