A seller’s real estate market can spell trouble for homebuyers. In a seller’s market, buyers face increased competition, low housing supply, and fewer concessions. And, for first-time homebuyers, a seller’s market can be even tougher to navigate since they have no experience buying a home.
If you’re a first-time homebuyer in a seller’s market, here are some tips to improve your chances of buying your dream home.
Credible can help you easily compare rates and mortgage options from multiple lenders.
Lenders generally require you to put some money down before they’ll grant a mortgage loan. The amount you need for a down payment has traditionally been 20% of the price of the home. But many lenders today require only 5% down for a conventional loan. Some may even require as little as 3%.
You might not need to make a down payment at all if you’re a veteran and take out a VA loan, or if you qualify for a USDA loan by buying in a rural area.
Even if you qualify for a no- or low-down-payment mortgage, it’s often advantageous to put down 20% or more on a home. Some of the reasons behind this include:
SMART REAL ESTATE ADVICE FOR FIRST-TIME HOMEBUYERS AND SELLERS
While you’re saving money for a down payment, this is a good time to check your credit report. You can get a free copy of your credit report once a year from all three credit bureaus — Equifax, Experian, and TransUnion — through AnnualCreditReport.com. Here’s what lenders look for before they grant you a loan:
Regardless if you’re renting or buying, a budget is an essential personal finance tool that you’ll want to maintain. Before you apply for a mortgage or start looking for a house, make sure you know how much you can afford. You should consider spending no more than three to five times your annual household income on a home.
Don’t forget to budget for other homeownership costs like property taxes, homeowners insurance, and closing costs.
With Credible, you can easily check mortgage rates from multiple lenders without affecting your credit.
Once you know what you’re comfortable spending, focus on getting pre-approved. This can help increase your chances of securing a home.
A pre-approval is different from a prequalification. Prequalifications are geared more toward buyers who are seeking an estimate of how much home they can afford. Pre-approvals require a deeper dive into your financial profile. Your lender will pull your credit report and ask you for certain financial documents, such as income statements, tax returns, and proof of savings.
Once you have a pre-approval letter in hand, you can make an offer with confidence. The pre-approval letter gives you an advantage over buyers who don’t have one, because it shows the seller that you’re a serious buyer and that you have the ability to purchase the home at the listed price.
17 QUESTIONS TO ASK YOUR REALTOR WHEN BUYING YOUR FIRST HOME
Buying in a seller’s market can be challenging. But keep plugging away, and be ready to make an offer as soon as you find a house that meets your criteria.
You might have your offer rejected multiple times, and that’s normal, especially in a seller's market. Working with a diligent and experienced real estate agent can improve your chances of becoming a homeowner.
To explore your mortgage options, check out Credible.
