Article by: Laura Grace Tarpley (https://www.businessinsider.com/personal-finance/tips-buy-home-competitive-market-2021-4)
- The housing market is hot right now, but there are still ways to buy a home.
- Get a preapproval letter, and use a realtor who knows how to navigate a hectic market.
- Make a list of things you do and don’t need in a house, because you’ll likely have to compromise.
Mortgage rates are at historic lows as the US economy struggles with the COVID-19 pandemic. It may seem like the perfect time to buy a house.
The downside? There aren’t enough homes for sale to meet the high demand. The housing market is especially competitive right now, with homes receiving multiple bids per day and and going for more than their asking price.
“I’ve been doing this 37 years, so I’ve been through booms, and I’ve been through busts,” Carolyn Morganbesser, Senior Manager of Mortgage Originations at Affinity Federal Credit Union, tells Insider. “This really is the busiest I’ve ever seen it.”
Still, buying a home isn’t impossible. There are steps you can take to increase your chances of getting a home before it disappears from the market.
1. Get a preapproval letter
When you start shopping for homes, you’ll probably want to apply for preapproval. When a lender gives you an official preapproval letter, it’s saying it would like to work with you under certain terms. You’ll learn the type of mortgages and interest rate you’re eligible for, and you’ll lock in your rate for a few months.
You don’t have to apply for preapproval to buy a home. But it’s likely a good idea — especially in a hot housing market like right now.
Showing the seller’s real estate agent a preapproval letter makes your offer more competitive than it would be without one. The agent will see that you’re taking the process seriously by already working with a lender, and that you’re financially stable enough to be preapproved.
2. Use a real estate agent you can trust
You may want to go through a realtor recommended by someone you know. If a family member or friend has used a realtor who helped them navigate a hectic housing market, you might want to use the same person.
Morganbesser also says you can ask your bank or credit union for help finding a real estate agent. Many have programs that set customers up with qualified realtors. The banking institution and agent communicate so the realtor can understand your full financial situation and help you make the most practical decision.
Teaming up with the right realtor can help you a) move quickly, and b) avoid paying over asking price if it isn’t actually financially feasible for you.
3. Make a list of priorities
Morganbesser recommends making a list of things you want in a house. Split your list into must-haves, things that would be nice to have, and things you can do without. For example, maybe you needthree bedrooms, would like a big back yard, and could go with or without a homeowner’s association.
In this market, you might not find a home that has everything you want before someone else swoops in to buy it. And if you’re in a hurry to move, there may not be time to wait for your dream home. So understanding your priorities can help you move quickly enough when you find a home you like.
“There’s not going to be a perfect house,” Morganbesser says. “The house is not going to have everything you want — or the likelihood of that is small. So you have to be willing to compromise.”