The spring home buying season is typically one of the busiest times of year to purchase a new home. Do you have plans of purchasing a new home this spring? The housing market has been very competitive recently due to a low supply of homes for sale and a strong buyer demand. According to an article by the Washington Post, “The imbalance between the supply and demand contributes to the rapid increase in prices.” The article also indicates that the median listing prices for homes were up 10.3% in January 2022 compared to January 2021. Additionally, the number of active listings declined by 28.4% from January 2021 to January 2022 which also puts an increased demand on buyers to find a home. To stay competitive in today’s market, you need to make sure your finances are in order and stand out from other potential buyers.
Below are five tips for helping you navigate a home purchase this spring.
1. Determine your budget and your needs
The first step in the home buying process is determining what you want your new house to include and what you can comfortably afford. Consider your current financial situation, the bills you are responsible for, and how much each of those bills are. Additionally, take into account the number of bathrooms and bedrooms you need and if you want a garage or basement. These factors, along with others, can influence the value of a home. For more information on what influences a home’s value, read about 6 features that will make a home more expensive. Lastly, our Home Affordability Calculator can help you determine how much house you can afford and will provide an estimate of your monthly payment based off of the information entered.
Interested in a new home? Read more about how much can you afford.
2. Save for your down payment and closing costs
Preparing your funds for down payment and closing costs is crucial. Due to the current competitive housing market, it’s not unusual for a home to have multiple buyers interested and an elevated purchase price. Dean Pilcher, Senior Vice President and Area Sales Manager for the St. Louis Metro, mentioned, “The first step for someone interested in purchasing a home is to get their finances in order. Talking to a lender can help you get an understanding of your credit history, down payment options, and your monthly payment.” This can also help you determine if your current savings strategy is sufficient or if an adjustment is needed to ensure the anticipated costs of the home purchase are covered.
Read more on Four Savings Tips for Purchasing a New Home.
3. Check in with your credit
Your credit is equally as important as saving for your down payment and closing costs. Your credit score can help your lender determine your ability to repay the loan. A positive credit history, paired with a good credit score, can help reassure lenders that you’ll be able to repay your loan. Some loans require a higher credit score than others, so be sure to check the minimum credit score with your home loan advisor on the loans you are interested in.
Learn more about Home Buying Tips: Are You Getting the Credit You Deserve?
4. Obtain your pre-qualification letter
To give your home offer a competitive advantage, consider obtaining a pre-qualification letter. Dean Pilcher states, “A pre-qualification letter is a must in most markets and may be required when submitting a purchase offer.” A pre-qualification letter is a document that shows you are conditionally approved for a home loan based off of the lenders initial review of your credit score, current funds and assets, debt to income ratio, and other factors. This document is ideal because it can show the seller that you are serious about purchasing a home and that you can afford the purchase price that they are asking.
For a list of other documents needed for a home purchase, review our purchase checklist.
5. Stick to your budget
You’ve created your budget for a reason, and it’s important that you stick to it. Make sure your budget includes outside costs, like moving and furniture expenses, and any immediate home improvement expenses. Talk to your lender about all of the costs that you will be responsible for during the home loan process to ensure you have enough cash saved. For a list of things to consider when you’re creating budget, read the essential guide to creating a home buying budget.
Preparing your finances and speaking with your lender to ensure your finances are in shape for a home purchase is a critical step towards homeownership. If you are prepared to purchase a new home with First Bank Mortgage, reach out to a knowledgeable home loan advisor near you to get started.