Buying a Home in 2018? Here’s What You Seriously Need to Know.
Home buying in 2018 has definitely seen some changes when compared to last year’s market. What’s ironic is that we’re in a Spring market….with winter weather, but that’s not stopping the market from gaining momentum in preparation for 75+ degree weather. Some prospective buyers have already started their search and others are lacing up their shoes to hit the ground running in the near future.
If you haven’t found your new home yet, I hope these tips will help you stay 2 steps ahead of the game and create success locating the perfect home for you and your family in 2018.
Avoid The Shiny Object Syndrome and Stay the Course
“If you chase two rabbits, you will not catch either” – Russian Proverb
If you’re approved for $250k, NO, it’s not smart to begin your search for homes in the $275k range with the hopes of getting a huge discount off the purchase price. Especially the homes that just came onto the market.
I’m not saying it can’t happen, it’s just not the best use of time, especially at the beginning of your search. You want to be able to build positive momentum. This can be done by avoiding the shiny object syndrome.
But Austin, what about foreclosures? Can’t I get a discounted price on foreclosed properties or homes that been on the market for a long time because they need repairs?
Sure you may go after foreclosures or properties that have been on the market for a long time, but only if you understand the circumstances that come with it. I find that most buyers look for foreclosures with the hopes of getting a great price and being able to renovate it to their liking. The problem is that they focus on just that, not the fact that a much more rigorous transaction now lies in front of them. Only take this option if your situation calls for it. Share your goals with your agent and as they advise you on the steps necessary, you’ll know if you’ll be comfortable with that type of process. You can find out more about buying foreclosures here.
Trust me, I completely understand that you want the best home, in the best neighborhood, with the best schools, with the best kitchen, with the best floor plan, with the best, best, best, best……
However, you’ll have to remember that your home is very much a liability as it is an asset and unless you’re planning on buying a multifamily, your living expenses can cripple your lifestyle. Don’t stretch your budget to the point where you’re working just to pay for your home.
To put things in perspective: There are 168 hours in a single week. Easy to say that a minimum of 40 hours are spent at work. Add in an average of 7 hours a night for sleep per week totaling 49 hours. Let’s add another 30 hours a week spent away from your home for commuting time, recreational activities, family outings, picking up kids/dropping them off at practice or daycare, etc. That’s a total of 119 hours. That’s almost 70% of your workweek that is spent OUTSIDE of the home. Does it make sense to spend a ton of money on something that is enjoyed only 30% of the time?
Remember, that’s with a basic 40 hour work week. It can easily be more.
The last thing to keep in mind is that you may be finding homes, falling in love, submitting offers only to have your agent utters those 4 unpleasant words…”We didn’t get it.”
Us agents actually hate giving bad news like that.
It won’t happen to everybody, but to those that feel like they will never find a home, don’t fret or get discouraged. This actually happens a lot more than you think. Just stay the course, continue your search, and continue to submit offers!
If you were to experience a couple of loses, you may have the urge to start looking at other options. Before you do, consult with your agent so they may give you feedback on whether that is the best option for you.
The right home will come directly to you if you let it!
Be ready to compete both mentally and financially
“If you continuously compete with others you become bitter. If you continuously compete with yourself you become better” – (I have no idea who said this, but it’s awesome).
On a national scale we are still in a seller’s market in most states and New Jersey is no different. Competition is fierce and if you’re not ready, you’ll be outbid time and time again. The truth is, there are too many buyers and not enough homes. As a result, great homes are receiving multiple offers and selling quicker than Usain Bolt!
As I preach to all my clients and those I come in contact with, it is important to have your financial game plan sound and clear. When you take this first step, you will be able to dictate how your search goes. Be honest with yourself and your current financial position.
Stay within your budget and realize who your competition is. Your agent will be able to guide you on who your competition will be. You’ll be able to learn how some loans compete against others. For example: An all cash offer is usually the strongest, followed by a conventional loan which is considered strong, followed by a FHA/VA loan which has moderate strength, and “last but also least,” the no down payment loans, grant loans, and NACA loans.
For example, let’s say a home is listed for $400k and it procured 4 offers all at asking price:
An all cash offer of $400,000
A 20% down conventional loan offer of $400k
A 3.5% down FHA loan offer of $400k
A 0%-down payment city grant loan offer of $400k.
In this example, it would be clear to see who the strongest offer is. The all cash offer.
Let’s look at the same home listed at $400k and procuring 4 offers either at asking price or near it.
An all cash offer of $375,000
A 5% down conventional loan offer of $400k with a $10k seller’s concession towards closing costs
A 10% down FHA loan offer of $400k
A 0%-down payment city grant loan offer of $400k.
In this case, the all-cash offer may not be considered the strongest offer this time around.
The conventional loan also lost some strength considering the offer is requesting a seller’s concession which lessens the purchase price by $10k equaling $390k net to the seller.
In this case, the FHA loan will stand out the most both with purchase price and down payment amount.
This is an extremely basic assessment and should only be taken into account when you’re in a multiple bid situation. There are other variables that can make any offer stronger or weaker.
Also keep in mind that the type of loan will also dictate how smooth your transaction could potentially be. A very easy example of this is a conventional loan being extremely helpful to purchase a foreclosed home that needs a lot of work. Using a FHA loan on the same home might put you in an uphill battle. You check out more info on conventional vs. FHA to see which loan is best for you.
While I’ve learn that anything is possible in real estate, remember to be honest with your financial position and the home you’re looking to obtain. The best homes are the homes that everyone wants and that, alone, will bring out the best offers from those people. Put yourself in the best position to compete and more importantly, win!
What to do about the rising interest rates.
“High interest rates focus on the revenue of a parasitic class” – Linda McQuaig
I’ll keep it brief regarding interest rates.
Many have heard the recent interest rate hikes over the past couple of months and yes, mortgage rates are on the rise.
While there are predictions that interest rates will continue to rise, they have leveled out for the time being.
I believe my “favorite” question I can’t answer is “What’s the current interest rate?”
After all, as an agent, I should know this info off the top of my head, right?!
Here’s the thing, most people ask that that question to find out what their interest rate will be, not the national average. I have no problem responding “Just under 4.50%” which is the current national average, but the truth is, YOU will be determining your own interest rate based on your financial health. Your mortgage lender will have the final say so. The better your financial position, the better your interest rate will be in spite of the national average.
You know what they say, “the people who get the best interest rates on loans are the people who don’t need the loan to begin with.”
All in all, yes, interest rates make your loan and mortgage much more expensive, but it’s also the cost of doing business. It always will be. Instead of focusing on what you can’t control, focus on what you can like improving your financial position. Your agent will also be able to suggest whether it’s a good time for you to buy or not based on that position and your future goals.
I promise that if you keep these concepts in mind, you will have a much more stress free buying process. Take them and apply them to your search. Your agent will guide you as long as you are honest with yourself and your expectations.
Maybe it’s time for that “forever” home, maybe it’s not.
Maybe it’s time for that investment property, maybe it’s not.
What I do know is that there’s a home for every buyer. Go out and find your home!
Blessings to a smooth transaction for you and your family!
How was your home buying experience? Comment below!