There is so much Real Estate information on the web it is easy to get carried away or feel overwhelmed. If you are a homebuyer or looking to enter the market this year, avoid these common misconceptions in real estate. Buying a house is one of the biggest financial decisions you will make, so be sure to get your facts in order.
THERE IS NOT ENOUGH AVAILABLE HOUSING
While this has been a concerning topic for years, especially this last year, the housing shortage is no deal buster. According to Zillow, available listed homes for sale were indeed down 17.5 percent in December 2021. With a surplus of millennial-aged homebuyers coming to market, supply must drastically change to meet demand.
On the positive side, home builders predict to drive up production in 2022. Single-family home starts could see a slight uptick of 5 percent. Supply will remain tight, but sellers should re-enter the market, which will help stabilize inventory. At this point, supply is considered a wildcard for 2022 – so act fast.
Experts and real estate professionals will look to inventory as an important measure throughout the year – you should too. Stay focused on your goals and lean on your agent for support to ensure you find the best home for you.
“I CANNOT COMPETE IN THE MARKET IF I DO NOT PAY CASH OR PAY OVER THE ASKING PRICE”
Highly-competitive markets to bring forth all-cash offers that win the bidding wars. It may be a deal-breaker for sellers, but buyers should not fear the cash competition.
Zillow showed that 37 percent of homes are selling over the asking price, and Redfin reported 30 percent of homes are purchased with cash, an all-time high in over seven years.
While all-cash purchases and higher offers have been on the rise, we must not forget about the remaining homes – roughly 6 out of 10 homes sold over the list price – the others are still in play.
One insightful perspective comes from a real estate agent in Idaho:
“Cash buyers are frequently the first to back out because they know they can compete in the market, so they easily get buyer’s remorse if they’re worried they might be overpaying for a house. That’s often good news for financed buyers because it means fewer bids to compete with.”
Real estate experts say putting in an offer 1 to 3 percent higher may be enough to win the bidding war. Most importantly, always stick to your budget. If putting in an offer that is more than the list price, knowing that it will put you in financial distress, do not do it. Keeping your budget will ensure your monthly payments are manageable and that you are confident in your purchase.
MORTGAGES RATES WILL DROP AGAIN
Many prospective buyers have been waiting on the sidelines hoping mortgage rates will drop again. Experts anticipate rates will increase in 2022 but will still reflect historic lows. It may help stabilize the fast-paced market, but prices, inventory, and demand are said to have a greater impact on how rates shift.
Given the slight rise, rates are expected to hover around a 3.4 to 4 percent average, still comparatively lower than previous years. If you are making a move in the purchase market, do it sooner rather than later. Make sure to gather all your options with lenders. Seek financial advice specific to your budget so that you can make the right move.
I NEED PERFECT CREDIT TO BUY A HOUSE
Having an outstanding credit score is an advantage when taking out a loan on a home – but it is not the end all be all. It will help with a lower interest rate. Your credit score is important when lenders consider your application. They can also steer you towards the best option.
Conventional loans require a score of 620 or above but may still be available with a higher interest rate. FHA loans offer eligibility for those with lower credit scores or less of a down payment. The minimum score required is 580. VA loans are available for veterans and active military. There is no set credit score requirement, but make sure to check with a mortgage professional in your area.
If your credit score is less than ideal, take any necessary steps to build up your credit before jumping into the housing market. This could mean monthly payments are on-time and consistent, errors are removed from your credit report, no large purchases are made, and decreasing your credit to 30 percent or less.
There are a variety of options available for those interested in buying a home. Reach out to a mortgage professional to see what you may be eligible for and what works best with your overall financial picture.
This article is intended to be accurate, but the information is not guaranteed. Please reach out to us directly if you have any specific real estate or mortgage questions or would like help from a local professional. The article was written bySparkling Marketing, Inc., with information from resources like Redfin, Zillow, RocketMortgage, and Forbes.