For every home purchase, there are ideal moments to buy. These are perfect confluences of your finances, market conditions, and property selection. When is the right time to buy? Start with those as your guiding landmarks to determine those ideal moments.
- Your Finances are Ready for a Mortgage
- Mortgage Rates are Low
- Homeowners are Eager to Sell
- The Home You Want is Available & In Price-Range
Of these factors, there are variables you can control and those you can’t. The two things you can control are your financial readiness and your home selection skills. Therefore, the factors out of your control become windows of opportunity.
In markets where sellers are eager, prices drop and you can find better homes at good prices. When the mortgage rate drops, this creates a window of opportunity to pay less on a home over time. When the market is flush with options, you have your choice of properties and prices.
Why Now (2020-2021) is a Home-Buying Window of Opportunity
Historically Low Mortgage Rate
Right now, in late 2020, it could be the perfect time for those ready to buy a house. Mortgage rates are hovering at a historical low. In 2002, mortgage rates were around 5-6%. Since 2012, mortgage rates have been in the 3% range. Today, we’re seeing them dip below 3% and an increasing number of lenders are offering even more favorable rates for promising homebuyers with a solid plan.
Eager Sellers – Lower Buyer Competition
Understandably, the whole pandemic shake-up has caused many people to rethink their moving plans, but the world doesn’t stand still for them. Sellers still need to get their houses off the market and reasons to move don’t evaporate. If you’re ready to buy a new house, the buyer competition has been decreased by the pandemic and aftermath.
This has left eager sellers who may be dropping home prices and are likely to be more giving in negotiations. While the pandemic has also slowed down home posting, leaving a smaller inventory, the competition for this inventory is not what could be predicted in a non-pandemic market.
Moving Service Availability
Because new homes are an orchestra of logistics, it’s worth remembering your movers. Right now, movers (among other relocation-related services) are more available. With fewer families moving, calendars are open and teams have a greater capacity to customize the service to your needs and to the new post-Covid safety measures.
Identifying Home Price Opportunities
Every local housing market is unique. You can find national and state housing price trends. You can find home prices by state, by neighborhood, and by street. The key is to find a house you love that is currently on the market for a good deal. Following the trends can help you find homes in your ideal region, neighborhoods with the architecture you like, and houses in your price range.
You can also search home-by-home for specific criteria (bedrooms, yard size, kitchen design) and keep an eye out for individual deals.
Depressed Local Markets
State, city, and neighborhoods all experience real estate ups and downs. The demand and availability of local houses along with larger influences like industry and economic changes will push local home prices. Sometimes a city is up and home prices are on the rise. Catch these early for a valuable investment. Sometimes a market is low, and very nice homes are on the market for unusually low prices.
Look for depressed local markets in regions where you’d like to live. This is a great way to find a home you’ll enjoy at a price lower than you’d normally pay for the space and amenities.
Fixer-Uppers
If you are handy or prepared to pay for repairs, a fixer-upper can be a great home deal. Not all sellers are prepared to get their house like-new and move-in-ready. With a thorough inspection and cost calculation, a fixer-upper could quickly become your dream home at a steal. Look for “flip” candidates, whether you plan to resell soon, rent it out, or enjoy the house for decades.
Rural and/or Poor Services
Many beautiful homes have dropped in price because they are too far from the city or off of major service lines. Homes with slow internet access, mineral-rich well water, rural power outages, or long drives to the store are – understandably – in lower demand. They also tend to result in a longer commute.
However, many people would find select rural homes to be paradise. Maybe you already work from home, so are prepared to install a signal booster and commuting is no issue. Maybe you love the taste of mineral well-water. Maybe a long drive past cows is your idea of the perfect morning and evening routine. That’s good news because rural homes tend to be lower in price and larger in both square feet and yard space.
You-Don’t-Minds
In fact, keeping in mind the “downsides” you’ll happily overlook is a great way to find deals at any urban density. Some homes have features that lower their market value, but may not lower their value in your eyes. These can come at a steal if you know how to find homes marked down for your favored reasons.
Examples may include steep steps and stairs, unusual floor plans, an untamed yard, or a non-picturesque location. There are all sorts of cosmetic, stylistic, and trend-based markdowns that could create a personally great home buying opportunity.
Long Time on the Market
When sorting homes for sale, look for houses that have been on the market the longest. Long times on the market lead to eager sellers who want any seller to take the property off their hands. There is always some reasonable explanation and often, this pool is where you’ll find the best rural or don’t-mind deals.
Preparing Your Finances for Opportunity Windows
Both the first and last step is being personally ready to buy a house. Prepare your finances so that when low interest rates and home deals occur, you are ready to claim the opportunity and buy a great house for a low rate.
Build Your Savings
Though most of the home can be covered in a mortgage, there’s still your down payment, earnest money, and closing costs to consider. These will all be paid out-of-pocket as part of the home buying pocket. That means they come from your savings. The earnest money is pre-down payment and goes to your first property taxes. The closing costs go to the paperwork, title office, lawyer, court, real estate agents, and any other final expenses. You may want to balance your savings plan and your entire home budget with these additional costs in mind.
Improve Your Credit Score
Your credit score is a tally of how reliably you use borrowed money. This includes credit cards, loans, lines of credit, and can also include basics like reliable bill payment. By improving your credit score with responsible card use and completed loan payments, you can improve your mortgage acceptance and rate potential.
Debt-to-Income
Make sure that you will have enough income to cover your monthly and annual debt payments. This is known as the debt-to-income ratio. If you are already carrying too much current debt, your mortgage may not be approved or may not be favorable.
Mortgage Pre-Approval
Speaking of mortgage approval, the strongest home bids are made when the lender has already reviewed and approved your loan application. Pre-approval means that should the seller agree to sell, you will assuredly be able to complete the transaction. Pre-qualification is not enough, as this is only an offer to consider your loan approval.
Get mortgage pre-approved for your price range of homes and your predicted down payment amount. In fact, your lender will likely be glad to help you identify the ideal price range for your pre-approved loan. From there, you can approach sellers confidently with a bank-backed bid for the house. Sellers love a buyer who has already taken care of the loan approval stage.
Is Now the Right Time for You to Buy a House?
The perfect time to buy a house is all about unique timing. Is the interest rate down? Are your local housing markets affordable? Is your dream house available? Are your personal finances ready to buy and close? These are no longer difficult questions to answer.
Today, we know the interest rates are down and that many housing markets are depressed. If your finances are also ready and the right house is available, then, yes. Now is the right time for you to buy a house. The next step is to apply for loan pre-approval. With a supportive lender, you can snag a dream house with low interest payments while the iron is hot.
Contact us today to consult on preparing your finances and for mortgage pre-approval before your dream home bid. From defining your likely closing costs to building the ideal loan for your purchase, the loan pre-approval process is designed to help homebuyers achieve a timely dream. We look forward to hearing from you and to helping you take advantage of this window of opportunity in the housing market.
