Market research compiled by Statista forecasts that the housing market in 2020 will rise. Although it is still lower than that of 2005 (7.08 million U.S. homes were sold in 2015 compared to the predicted 5.46 million in 2020), the climb from 4.12 million during the recession in 2008 shows that the market is slowly regaining strength. Therefore, 2020 is predicted to be a good time to buy a home.
Rapid Increase in Home Prices
According to Holden Lewis of NerdWallet, mortgage rates are predicted to remain favorable throughout 2020. Expected to be around 4% APR for a 30-year fixed-rate mortgage, the low rates encourage people to buy a home, especially those who had difficulty finding affordable properties in the past.
He claims that if mortgage rates remain low throughout the year, it makes monthly payments far more affordable.
However, despite mortgage rates looking positive, the prices of properties are on the rise. According to a report released by CoreLogic, the annual home price growth is “expected to increase by 5.6 percent by September 2020”.
With millennial homebuyers ages 30-38 spending an average of $383,000 between 2016 and 2019 to buy a home, many people may be ‘price out’ of the market due to rising home prices.
Nine Steps to Buy A Home
#1 Review Your Finances
Before looking at properties, one of the first steps is to review your finances. To be able to afford mortgage payments and household bills, your income should be approximately $59,288 to make a monthly payment of $1,383, according to HSH.com.
To help you estimate the income you need to buy a home, a mortgage calculator is a useful tool to predict your mortgage payments. Estimating the initial down payment and monthly payments, the calculator will give you a reasonable idea of the monthly income you need.
In addition to ensuring that you have enough income to pay your monthly mortgage, your existing debts must be in line with lender requirements to qualify for a home loan.
#2 Save for the Down Payment and Closing Costs
To be in the best possible financial position to buy a home, consult with your mortgage lender early in the process and get pre-qualified for a mortgage. This will give you insight into the amount you will need to save for the down payment and closing costs.
The down payment required to get a mortgage varies from zero percent to twenty percent of the purchase price. And closing costs typically run 2 to 5 percent of the purchase price, although there are programs to help with these costs.
Your mortgage broker can tell you about the different types of mortgages for which you may qualify, and help with a mortgage pre-approval. Then you’ll know what you need to save for both the down payment and closing costs.
#3 Raise Your Credit Score
Although a credit score of 620 is considered average, some mortgage programs have a lower minimum credit score to qualify or a home loan. Generally speaking, though, you will get a mortgage with a lower interest rate if you have a higher credit score.
If you are thinking about buying a home in the near future, get a copy of your credit report and make changes with your finances that could raise your score, such as lowering credit card balances and correcting errors.
#4 Apply for a Mortgage Pre-Approval
Before talking with a real estate agent, it’s helpful to apply for a mortgage pre-approval, which will let you know how much you can borrow to buy a home. A mortgage pre-approval will also give you a good idea of the associated costs to buy a home, such as the down payment and closing costs.
Real estate agents will often require you to be pre-approved for a mortgage before taking you to preview homes, and sellers will often want to know that you are pre-approved before coming to see their home.
#5 Start Working with a Real Estate Agent
Now it is time to select a real estate agent and start looking for a home to buy. Your real estate agent with help you navigate through the process of finding a home to buy, making an offer, and closing on the property.
Some of the qualities you should review when selecting a real estate agent include:
- Their experience in the industry.
- Their communication skills.
- Their portfolio of houses bought and sold.
- Their knowledge of the local real estate market.
#6 Searching for a Home
Your real estate agent will help you search for a home, perhaps even knowing about properties that are not listed online. However, most properties are on the MLS, allowing you to search for them on your own.
While searching for a home, pay attention to key must-have features, and remember that your real estate agent will help you negotiate the final price.
It’s also worth paying attention to the home values for the communities in which you are searching for a home, while also paying attention to the comps (sales prices of comparable homes you are looking to buy). For example, in Tampa according to Zillow, the median home price is $ 242,614.
Furthermore, do research into the school district and home resale values. Economists estimate that, “Within suburban neighborhoods, a 5 percent improvement in test scores can raise prices by 2.5 percent”.
Once you find homes you want to see, your real estate agent will take you to see the homes while providing you with additional information.
#7 Submit an Offer
When you find a home to buy, it is time to submit as offer. Your real estate agent will help you decide how much to offer for the property and submit the offer for you.
Often times, the seller will submit a counteroffer to negotiate the sales price, which your agent will review with you. Counteroffers may be submitted by seller and buyer numerous times till both parties agree on a price, then a formal contract is signed by both parties and the buyer delivers the earnest money.
#8 Home Inspection, Appraisal, Insurance, Lender Documents, Title Company
Now that you have a home under contract, there are several things you need to do that your real estate agent and mortgage broker will help you accomplish.
Typically, you will need to get a home inspection and appraisal, home insurance, final documents needed by your lender, and a title company for the title work.
Work closely with your real estate agent to ensure that everything is handled correctly relating to the property, including repairs by the seller for issues found in the home inspection. And work closely with your mortgage broker regarding everything needed for the financing.
#9 Close on the Property
Once everything is done, you will be given a closing date and a list of everything you should bring to the closing. including the funds needed for the down payment and closing costs.
Marimark Realty is a full-service real estate company in Tampa, Florida. Our focus is on providing a personalized experience for both buyers and sellers of residential and commercial properties, as well as investors.
To begin the journey of purchasing or selling your home, or purchasing commercial or investment properties, contact us at your earliest convenience.