5 things this first-time homebuyer learned about today’s seller’s market
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After years of suffering one rent increase after another, GiGi Thomas was ready to break out of what she calls the ârent raceâ.
Now 34-year-old Thomas and his fiancee are weeks away from living in a brand new home. âI felt like I was throwing my money into an apartment,â she says. Armed with a predictable housing payment, Thomas believes she has a more secure future because she is paying for something her family will own.
Thomas and his fiancÃ©e had to overcome a lot of difficulties to get to where they are. They spent four months losing bidding wars. âThere are people who offer $ 30,000 and $ 50,000 more than the list price,â she says. âWe just couldn’t compete with that. Eventually, they changed their tactics and filed a deposit on new construction in the Dallas, Texas area. The house should be ready for them by the end of the year.
Navigating a booming housing market wasn’t the only challenge. Thomas has a six-figure income but a low credit score. She is also a self-employed entrepreneur with an income of 1099 which makes it even more difficult to get a loan. And as a black home buyer, fear that discrimination could negatively impact her chances of owning a home hung over her head. âI definitely had to get over this fear,â she says.
The couple’s journey to buying a first home hasn’t been quick or easy, but Thomas and his fiancÃ©e have learned a lot along the way. Here is the advice she gives to anyone looking to become a homeowner.
A First-Time Home Buyer Perspective: 5 Tips for Navigating Today’s Seller Market
This real estate market is difficult and stressful for buyers. âEvery house we’ve made an offer we’ve really invested in, you know, and it hurt every time we’ve been turned down,â Thomas said.
There are no âeasyâ buttons to buying a home, but with the right perspective, the right strategies, and the right advice, you can increase your chances of success.
1. The experiences of others may not apply to you
With so many factors that go into a home buying experience, every trip is very different.
Any home buying stories you hear or read online should be approached with a hint of skepticism, Thomas cautions. Not everyone is telling the whole truth, she says: âPeople are ashamed of their credit rating, sometimes even their income. When a person shares a positive or negative experience, they may remember or forget key information.
Housing laws and regulations vary from state to state and municipality to municipality. Two houses can be 15 miles apart, but property taxes are different in those areas, and those taxes are going to play a big part in your monthly payment, Thomas says.
Beyond the home you are looking to buy, your personal circumstances have a strong influence on the type of mortgage or home that is right for you. Your credit score and income are important to a mortgage lender, but they’re not the only factors you consider. Someone may say their mortgage application was turned down due to a credit score of 680, without mentioning student loan debt, income, past bankruptcy, or the type of loan they have. demand.
Thomas was pre-approved for a home loan with a credit score of 630. What is important to know about his situation is that his fiancee had a credit score of 700+ and they all have both high incomes in the six figures. They were also pre-approved for an FHA loan, a loan backed by the Federal Housing Administration, which has lower credit score requirements than a conventional loan.
2. Focus on spending habits that boost your savings and credit score
The higher your credit score and the more savings you have, the easier it is to qualify for a home loan with the lowest possible mortgage interest rate. Thomas and his fiancee started saving for a house and an emergency fund about a year before they started looking for housing. Having more cash on hand gave them more flexibility during the home buying process.
Thomas started out with a credit score of around 585, and his lender suggested he pay off a credit card balance using his savings to increase his credit utilization rate. She was using 50% of available credit, but when she reduced it to 10%, her credit rating went from about 585 to 630 in about two months, she says.
It’s important to continue to manage your spending habits and build your savings and credit rating even after pre-approval for a mortgage. “[Your lender is] will educate you on the things you can do to help increase your [credit] score because your pre-approval is just a pre-approval, âshe says. “It’s not for final approval, you can always get turned down.”
3. Get advice from real estate professionals, not your friends
One of the best ways to get advice tailored to your personal situation is working with experienced industry professionals. âI would tell everyone to just seek professional advice,â Thomas says. Your family and friends may be homeowners, but that doesn’t necessarily make them experts. âIf you listen to your parents, they bought a house 20 or 30 years ago. Things have changed for 20-30 years.
Once you’ve started the home buying process, you want to talk to your real estate agent or lender before making any major decision. Thomas improved his credit rating by paying off his debts, which is what his lender recommended that he do. Don’t do anything like this until you’ve got your mortgage pre-approved and talked to a professional, Thomas says. Your lender can help you determine which course of action is best for you.
Talk to a handful of real estate agents and licensed mortgage lenders. Look for someone who has knowledge and experience in the area where you want to live and with the type of mortgage that is best for you. To find someone you can trust, educate yourself in your community and chat with other professionals you work with. Thomas and his fiancee were working with a real estate agent they knew from the church.
4. Face your fears and apply
Becoming a homeowner is a big commitment and it can be intimidating. You will need to take care of maintenance and upkeep. But for Thomas, the pros outweigh the cons.
Don’t let worst-case fears or someone else’s negative experience stop you from making your own story, she says. ” Your whole life [you hear] about the redlining, the mortgage industry trying to keep black people outâ¦ it messes your head, âThomas says. ” You’re afraid. You don’t want to apply.
But after going through the home buying process, she realized that it wasn’t as impossible as it originally was. âWe think we are not worthy, or we think we will not be approved because of historical evidence,â Thomas says. She thinks you have to try and apply, or you’ll never know for sure.
If it’s time for you to own a home, educate yourself on the process and how to defend yourself. At the very least, you can get a feel for your options by going through the mortgage pre-approval process to see what type of mortgage you qualify for, or by speaking with a real estate agent in your local real estate market.
5. Set a budget for buying a home and stick to it
When shopping at home, it’s important to stick to your home buying budget. âDon’t try to follow the Joneses. People will look at the houses of their friends or celebrities and they will be like, oh, I have to have this and I have to have that, âThomas says. “Really, you just need to get out of the apartment you’re in.” You may not be able to find everything you want in a house, but you may be able to make some changes or additions later.
If you are buying a house with someone else, you will also want to consider the needs and wants of your partner in a house when determining your budget. Thomas says it was difficult to budget for a home purchase with his fiancÃ©e. Thomas considers himself the most frugal, but ultimately opted for a maximum monthly payment of $ 3,000.
The couple will pay $ 318,000 for their new home and estimate their monthly payment to be up to $ 2,500. âI really don’t want a mortgage payment of $ 2,500 a month, but here we are. You have to compromise somewhere, âsays Thomas. This monthly payment estimate includes fairly high property taxes, mortgage principal and interest, home insurance and mortgage insurance.