August 4th, 2018 2:27 PM by Jackie A. Graves, President
If you’ve yet to enter
the housing market, but are thinking of buying a home in 2018, there’s a lot
you need to know.
As I once
pointed out, this isn’t your older
sibling’s housing market. Not just anyone can get a mortgage these
days. You actually have to qualify. But we’ll get to that in a minute.
by talking about home prices, which have soared in recent years.
you’re prepping to buy a home this year, expect to be shocked, and not in a
good way. At this point in the cycle,
home prices have eclipsed old all-time highs in many parts of the country.
And even if
they haven’t yet, there’s a good chance you’ll be paying more than the
Zestimate or Redfin Estimate for the property in question due to limited
inventory and strong demand. In short, expect to shell out a lot of dough if
you want a home in 2018.
that home being out of your price range, you may want to get pre-approved with
a bank or mortgage lender ASAP. First off, real estate agents won’t give you
the time of day without one.
if you don’t know how much house you can afford, you’re basically wasting
your time by perusing listings and going to open houses. This is especially
true if the homes you’ve got your eye on are consistently going above asking.
It’s not hard
or all that time consuming to get a mortgage pre-approval, and it’ll give you more
confidence and perhaps make you more serious about finally making the move.
at it, you should check your credit scores (all 3 of them) and determine if
anything needs to be addressed. As I always say, credit scoring changes can
take time, so give yourself plenty of it. Don’t wait until the last minute.
And as you’re
addressing anything that needs more attention, do yourself a favor and put the
credit cards in the freezer (or somewhere else out of reach). Lots of spending,
even if you pay it back, can ding your scores, even if just momentarily. Bad
timing can create big headaches.
pumping the brakes on spending might give you a nice buffer for closing costs,
down payment funds, moving costs, and renovation expenses once you do buy.
It’s the same
story in 2018 as it was in 2017, 2016, and heck, even as far back as 2012.
There’s really been a lack of inventory since the market bottomed because homes
were never for sale en masse.
foreclosed on or deployed real estate short sales to move on, and banks made
sure inventory never flooded the market.
Now we’ve got
would-be sellers with nowhere to go, thanks to the massive price increases
realized in the past few years. It’s hard to move up or downsize, so a lot of
folks are staying put. That means less choice for you.
don’t have the same skill set as Joanna and Chip Gaines, but you might still
wind up with a fixer-upper thanks to those inventory constraints. And that’s
learned from buying real estate is that you’re typically never going to be
content with the upgrades previous owners or developers make anyway. So why pay
good chance you’ll want to make the home yours, with special touches and
changes that distance yourself from the previous owner. Don’t be afraid to go
down that road, but also know the difference between blemishes and design
challenges, and major problems.
more annoying is that you’re probably going to have to fight to get your hands
on the few properties that are out there, depending on the housing market.
metros, bidding wars will again be the norm, and there will always be someone
willing to outbid you for that home they just must have.
It’s okay to pay more
than asking (or even the appraised value), but it’s also important to keep in
mind that there are always more fish in the sea. Stay poised and don’t let your
emotions get the best of you. Like anything else, it’s okay to walk away. Trust
2018 will likely be a seller’s market once again doesn’t mean you can’t
negotiate. You can still get into a bidding war, win the thing, and then
inspect the heck out of the house.
are key to determining what will need to be addressed once the home changes
hands, and what the seller will need to do to compensate you for those issues.
If you don’t
get a quality inspection (or two), you will have a difficult time asking for
credits for closing costs or even a lower purchase price. Take it very seriously.
might have your hands full with an overzealous real estate agent, it’s
important not to neglect your mortgage homework.
often just mailed in, with little attention given to where they are originated.
Your real estate agent will have their preferred lender that you “really should
consider using because they’re the best,” but you don’t have to use them or
even speak to them.
typically say get a quote from them as a courtesy, and to appease your agent,
but also shop around with other banks, credit unions, lenders, and mortgage brokers.
At the same
time, think about how you want to structure the mortgage, including down
payment, loan type (FHA or conventional), and loan program. The 30-year
fixed isn’t a no-brainer. There are other programs that make sense too that
often get swept under the rug. Make the choice yourself.
done your homework and are in good financial shape, you should be able to get
your hands on a pretty low mortgage rate in 2018. While not absolutely
rock-bottom anymore, mortgage interest rates are still historically
And the 2018 mortgage rate forecast looks favorable, so
they may stay put for awhile longer.
In terms of
financing, it’s still a great time to buy a home. Consider that the silver
lining to an otherwise pricey and competitive housing market.
make time to shop to ensure you get the best rate and the lowest fees. Just
because rates are cheap doesn’t mean you should just accept what’s thrown in
front of you. Still complain, still negotiate, still ask for more!
get too excited, or worried that time is running out, it might actually be in
your favor to slow play this one.
Per Zillow, the best time to buy a home may be in late summer,
including the months of August and September.
you’ve got the slow, cold months at the start of the year where there isn’t
much inventory, followed by the strong spring housing market where everyone and
their money wants to buy.
Then you get
a lull and perhaps even a dip in prices during summer, which could be an
attractive entry point. You might even get lucky and snag a price cut with a
lot less competition while other prospective buyers are on vacation.
a moment to ensure you actually want to buy a home as opposed to continuing to rent. I
constantly hear the old “throwing away money on rent” line and it never gets
old. Then I proceed to fantasize about renting with not a care in the world.
Are you sure
you’re throwing away money on rent? Renting can be pretty awesome. You don’t
pay property taxes, homeowners insurance, HOA dues, PMI, or mortgage interest.
And you can leave whenever you want. That sounds like a sweet deal too.
Oh, and if
anything goes wrong, you can just call your landlord or property management
company. With a home, the problem is yours, and yours alone to deal with.
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