If you’re hoping to buy your first home this year, it would not be uncommon to be a little intimated of the market ahead.
Don’t worry. While the market will remain very competitive throughout 2021, you can land the home you want with the right knowledge, good preparation and some flexibility.
What to expect in the year ahead
With housing inventory at its lowest level ever, 2021 will continue to be a sellers’ market. As the year progresses, we expect inventory to begin to ease a bit and, while prices will continue to rise, they won’t be going up quite as fast as last year.
Interest rates — which have been at historic lows — will still be favorable, rising slightly to 3.4% by the end of the year.
And since COVID-19 will remain a concern for months to come, buyers should expect much of the home-buying experience to remain digital.
How to get ready
In this competitive environment buyers need to be prepared, and that means putting finances first. Here are some key steps to take:
Get your finances in order. Be sure to check your credit reports and clear up any mistakes before you apply for a mortgage.
Play house. Figure out what you can actually afford each month. Combine your current rent with the amount of money you’re saving each month, and test out what you can comfortably afford on a home by increasing your savings per month.
Research financing options. Educate yourself on the different types of loans available as well as first-time home buyer assistance programs. Knowing your options will make it easier to shop for a lender.
Get pre-approved. Knowing the amount you’re qualified to borrow will help you determine how much house you can afford. It’ll also show real estate agents and sellers that you’re a serious buyer and will allow you to move quickly when you find a place you love. Talk to a lender to get pre-approved for your home loan.
Set a realistic budget. Just because a lender pre-approves you for a certain amount doesn’t mean you should put it all into that new home. It’s important to keep aside funds to cover both expected and unexpected expenses.
Launch the search; land your home
You’ve done all the prep work, now comes the fun part: actually finding your home!
Start your hunt online. Thanks to the pandemic, sellers are offering more online tools — like virtual and 3D video tours — to help you experience homes remotely. Exploring homes in-depth online will help you visualize what’s in your price range, and can help you narrow down your list of ‘must-haves” and “nice-to-haves.” On realtor.com, you can also check the noise score, commute time, and local restaurants in the area directly on the listing.
Get help from an experienced real estate agent. You want to work with someone who specializes in both the neighborhood and price range you’re focusing on. With their knowledge of what’s available and what homes are selling for in your specific search area, they’ll be able to help you price your offers just right and may know of nearby neighborhoods that fit your criteria that you might not be familiar with.
Be realistic. It’s natural to refine your wants and needs as you look at different homes, But no house is going to be perfect, and it’s important to be flexible. Just be sure you can live with any compromises you’re making. Buying a home is a big investment and you want to be happy in your new home.
Only look at homes you can afford. To avoid overextending yourself financially, limit your searching to only look at homes in your price range. Set a price alert in the areas you like so you can see homes that you can actually afford as soon as they hit the market.
Be ready to move quickly. As we saw in 2020, properties can move really fast in a sellers’ market. If you see a place you love, make an offer quickly; with so much competition, it could be gone tomorrow. Your agent can help you come up with a winning strategy or help you navigate a bidding war if you find yourself in this situation.
While 2021 will be another challenging year for first-time buyers, with the right preparation and team helping you, the process can become a bit less daunting… and hopefully even fun. Happy house hunting!
Written by Lexi Holbert - www.realtor.com