If you find yourself asking this question, trust us–you’re not alone. With rising rents and ongoing inflation eating into the savings of would-be buyers, first-timers are fearful they can’t save enough for a down payment. The media hypes that mortgage rates are up, and home prices are not projected to crash. But as sales slow, inventory will gradually start to grow, putting the market back on a level field for negotiations.
The intensity of the past two years might have put your home search on hold, but we think you may have more opportunity than you know. Here are 5 market trends that may be the news you need to reenter the market.
- Sellers Are More Willing to Help You Buy Down the Rate
Did you know that lenders offer a program called “Seller Buydown?” Instead of the seller lowering their listing price, they will opt to help buy down your rate which means over the course of two or three years you can save on your monthly payment and the cost of your mortgage over the fixed 30-year period. Some sellers are also willing to help pay for closing costs. By the way of a term that lenders refer to as seller concessions, this saves both parties money and makes for a harmonious sale of the property. Self-employed? This program also applies to those applying without traditional tax returns.
We see you searching for your dream home on Zillow late at night. Use our Interest Rate Buydown Calculator to play with numbers and find out what you can save!
- Gone Are the Days of Waiving Contingencies
In the heat of 2020-2021, sellers were calling the shots. This caused heated bidding wars that required buyers to drop all contingencies to make their offers stand out. But now things are different. The pool of buyers has shrunk, and it gives them more leverage when submitting their offers. This doesn’t mean it’s fully shifted to a buyer’s market, but drastically overpaying or waiving contingencies is not currently a needed strategy.
- 20% Down is an Outdated Rule
We are living in the 21st century and a lot has changed. If you’ve been told that you need to save 20% for a down payment to afford a home, you have unfortunately been fed misinformation. Most FHA or Conventional Loan Programs can qualify a new buyer with 3-3.5% down and 0% if you are a Veteran. As we reference in our September article, this is also a common misconception for self-employed borrowers. Yes, home prices are higher so you will need to save more than you did in the 50s, but don’t let this deter you.
- Most States Offer Grant Money to First-Time Homebuyers
There are a growing number of down payment assistance programs available nationwide. Applying for this program can take some time depending on the demand but qualifying could be as simple as meeting minimum credit score and debt-to-income ratio requirements. This is a strategy you should discuss with a trusted lender that can help you clear this financial hurdle.
- Motivators to Buy a Home are High for Younger Generations
If homeownership is important to you, it’s helpful to know the benefits before you start the process. The cost of rent is rapidly increasing, but owning a home gives you the security you might be seeking. It is an important tool that buyers can use to build up equity or use as an investment property for supplemental income. There are plenty of non-financial reasons that might resonate with you too that can motivate you to reach this goal.
In 2023, we do think buyers and sellers will need to be flexible to adjustments, stay on top of up-to-date market trends, and exercise a healthy dose of patience. However, the decision to buy a home is really one that should reflect your current financial situation. A good lender can provide educated advice to give you an honest look at the right timing for you. Contact us below and we’ll be happy to give you our time to get your questions answered.
If you want more insight, check out this article recently featured in Bloomberg on why waiting for home prices to drop is a bad strategy.
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