There is little housing inventory, but there is plenty of demand. Many home buyers are now in bidding arms and competing with all offers, despite mortgage rates being at historic lows.
According to our housing experts, this means that homes sell well above the asking price in some of the most competitive markets. They also believe that 2020 was a strong year for sellers and that 2021 could be.
Are you thinking about purchasing a home? Experts advise that there’s no perfect moment to buy a home. Instead, it is best to wait until you feel the market is more favorable.
Price isn’t the only thing that matters, especially when there is still a recession in the U.S. due to the coronavirus virus pandemic.
Adriana Buenrostro, an agent with Prosper Real Estate Santa Rosa in California, said that low-interest rates have attracted many people. She says that it’s possible to get a mortgage if you have the downpayment, steady earnings, and sufficient reserves. “If you don’t earn enough or your job isn’t stable, everything can get tricky.”
Here’s some advice for those who are debating whether they should wait or buy a house.
When is it a good idea to buy a home?
Long considered an integral part of the American Dream, owning a home is a must. But it can also become a nightmare if the house is not purchased when you are ready. Here are five indicators you’re ready to buy a property.
You can have a steady income
Before buying a house, you need to feel financially secure. If you have had a steady income for at least a few years, this is a good indicator you are ready to move toward homeownership.
“We’re living in the midst of a pandemic. With COVID-19, it is important to have a steady job. Buenrostro believes that this is the most pressing issue in our current time.
Lenders are looking for proof that you have a track record of employment. This is to ensure that there is enough money coming in to pay for the mortgage. The majority of lenders request your W-2s and pay stubs.
You Have Control of Your Debt
The next thing you should consider is your debt/income ratio. This tells you how likely you are that monthly mortgage payments will be affordable given your current debt level and your monthly income.
DTI is typically used to describe bills like student loans and credit card payments. It does not include living expenses such as food, gas, or utilities. According to the Consumer Financial Protection Bureau (CFPB), although there are different maximum DTI levels for each lender and type of mortgage, most lenders will look for a DTI lower than or equaling 43%.
The lower the number, the better. Prioritize paying off your debt before investing in the realty market.
You’ve got enough savings
You will need to show your lender proof that you have sufficient savings to cover the initial costs of buying a property.
In particular, you need to save enough to cover the downpayment and closing costs.
Depending on the type and amount of mortgage you receive, a downpayment can be from 3.5% to 20 percent of the home’s price. The closing cost usually adds 2% to 5 percent to the home’s purchase price.
Lenders are also looking for sufficient funds to cover future payments and emergencies.
Your Credit Score Is Excellent
Lenders can use their own credit scoring systems to determine how risky an applicant is. Dan Moralez from Northpointe Bank of Michigan, a mortgage lender, said that good credit was in the high 600s to low 700s before the pandemic. He states that credit scores have risen to the mid-700s, or even higher.
Before purchasing a home, it’s important to verify both your credit score as well credit report. Each week, all three major credit agencies will provide a free credit report. Check your credit score online or visit a website that provides free credit scores.
Lenders have been more cautious in the wake of the pandemic. Check your credit report regularly for any inaccuracies that could compromise your creditworthiness.
You’re Ready To Settle Down
A house purchase can be expensive. For your home to be fully furnished, you’ll need to pay thousands of money upfront.
When you know that you can stay in one place for a longer period of time, buying is the right thing to do.
Moralez points out that it is crucial to take into account your long-term objectives. “Often, homebuyers who are first-time buyers do not know what the future holds. Will they be able to relocate? Are they thinking of staying in their current area or looking for a new job?
Be aware that future selling of your home can also be stressful and expensive since the seller usually pays commission to an agent.