Factors to consider before you start your house-hunting journey.
Is now the best time to buy a home? It’s not an easy question, but rather one that involves many considerations, including:
- Is the current market favorable for buyers?
- Are today’s interest rates affordable?
- Is it the right time for you personally?
Is the Current Market Favorable for Buyers?
When prices are low, and there is more supply than demand (more sellers than buyers), you’re in a Buyer’s Market. The benefit to you is the diminished likelihood of becoming involved in a bidding war. In such a market, sellers’ homes tend to remain on the market longer than they anticipated, allowing buyers to negotiate for lower prices and better concessions. Aside from For Sale signs, other indicators of a Buyer’s Market include – lower home prices, a lagging rate of new construction, and a Realtor’s assessment of the current supply rate. This is an estimate of how long it would take to sell every home on the market if no more homes went up for sale. A rate of six months or longer is generally indicative of a Buyer’s Market.
Note that home prices can also change depending on the time of year. Rates can be substantially lower during the winter months because demand is low, and sellers who need to sell as soon as possible might be more negotiable. On the other hand, your choices as a home buyer may be limited between November and March because many sellers wait until the summer months to sell.
Experts agree that 2021 was a Seller’s Market in the U.S., though this varied per region. The National Association of Realtors predicts that new construction is expected to increase, especially for starter homes and middle-market properties. However, many say it won’t increase enough to keep up with population growth and job creation. Other economic experts foresee that recent changes in tax law, which limit the deductibility of property taxes in high-rate tax areas like New York and New Jersey, could prompt an exodus of homeowners to more affordable areas. That could add more supply, but that could be offset if new limited deductibility suppresses demand.
Are Interest Rates Favorable?
In late December 2020, residential mortgage rates were at an all-time low. Mortgage rates have increased since then. A trusted residential mortgage banker like us can give you an idea of the best rate you can currently qualify for, based on your income, debt, credit score, down payment, and other factors. But be aware of two things: first, no mortgage services company can predict the future, and second, the best mortgage lending firms take more into account than just interest rates.
At Ark, we will structure a personalized loan designed to provide each individual borrower the best combination of rate, down payment, length of term, total payments, and tax outcome.
Is it the Right Time for You Personally?
You have to be in the right position financially to purchase a home. Unless you have enough cash to purchase your home outright you’ll have to obtain a mortgage. To qualify for a mortgage, you need to have two years of verifiable employment, a credit score of at least 500 for an FHA loan, or 620 for a conforming loan, a maximum back-end DTI ratio of 43%, and no foreclosures or bankruptcies for the past 4-7 years. Furthermore, you need to put at least 3.5% for an FHA loan or 3% for a conforming loan, plus have sufficient funds to cover your closing costs. You should also make sure any overdue debt payments have been brought up to date.
You should know your maximum affordable payment (MAP) to determine a realistic budget when considering a home. Use Ark’s Mortgage Calculators to help with this process.
You also have to be in the right frame of mind. Are you prepared to commit to a specific neighborhood, size, and style of home? Are you ready to take on the responsibility of paying your monthly mortgage, tax, and insurance costs as well as home maintenance expenses (repairs, landscaping, Homeowner Association Fees if applicable)?
Timing the market can be difficult. But it’s never too early to contact Ark Mortgage for more information. We always have time for you.