5 Useful Tips When Buying a House in 2021
Buying a house is a huge commitment, and most likely the most expensive purchase you’ll ever have to make. Since the pandemic struck, mortgage rates have been falling rapidly, reaching an all-time low of less than 3 per cent for the first time in over 30 years.
Nonetheless, you may want to ask, is now a great time to buy a house? Well, the answer to this question is dependent on your current financial situation. Today, many potential homebuyers are moving from urban cities to search for cheaper and more spacious homes in suburban regions. One certain thing is, buying a house this year is going to be a lot different than in previous years.
The COVID-19 pandemic has made buying and selling homes a lot more complicated than before—though many real estate companies are finding ways to adapt. Home sellers have become very reluctant to hold open houses nor let you into their homes, and prospective buyers are equally reluctant to visit a stranger’s house for inspection. Due to this, online listings and virtual tours have become the order of the day but the major change in the housing market is the limited supply.
The struggle to find a home that not only fits your specific requirement but falls within your price range is becoming increasingly stiff. Therefore, if you’re planning to buy a house this year, it is important to take advantage of the following tips to guide you in your decision making.
1. Know your credit score
Before you make the first move on your journey to purchasing a house, do check your credit score. It plays a very important role in what type of loans and interest rates you currently qualify for.
Just by looking at your credit score, lenders can instantly tell the level of risk they would bear by lending you money. Also, considering the effect of the pandemic on the economy, most lenders have tightened their grip on how they lend money—and you might need to have a credit score of at least 630 or more to qualify.
So, before you apply for a mortgage, check your monthly bank statement or inquire from your credit card company what your current credit score is.
2. Never exceed your outer limit
Taking on a mortgage is one thing and taking on a really high mortgage is another. The problem with the latter is, doing so puts you at risk of falling behind on your other bills and this can ultimately lead you into a huge debt.
To determine how much you can actually afford for a house, start by making a comparison of your current debts with your current income after taxes and deductions. This would give you a picture of how much money you can afford to spend each month servicing your mortgage.
After you have determined how much you want to borrow, use a mortgage calculator which would show you just how much debt you can safely take on. It is a very helpful tool where you can tweak various inputs such as lower interest rates and the terms and conditions of your loan to discover how it impacts your monthly payments. Your outer limit is the amount you’re most comfortable with after using a mortgage calculator.
3. Take note of property taxes
When purchasing a home, you should know that you’re not only going to be paying the principal and interest fee on your mortgage every month, you’ll also have to deal with property taxes.
So, before buying any house, be sure to inquire just how much the potential property tax bill for it would be. Also, look out for the property tax history which should be available as a part of the house’s listing. Looking at the house’s property tax history would give you an idea of just how erratic the price fluctuations are in that neighbourhood.
In some areas, as a practice, houses are reassessed on an annual basis and purchasing a home in that town would mean a potential annual increase in your property taxes.
4. Be prepared for a bidding war
Limited houses on the market means more stiff competition for the available ones. If you eventually find the ‘perfect’ home for you, chances are you’re not the only one who’s interested in it.
In popular areas, bidding wars are quite common and have even become a norm, especially if the property is quite popular. Home sellers love bidding wars because it means they can get an offer that exceeds their asking price but as a buyer, it’s something you always want to avoid.
However, bidding for a house can sometimes be unavoidable and you might need to slug it out with other buyers to come out victorious. You don’t even always have to be the highest bidder to win the sale; you can try making yourself more desirable to the seller by pre-approval letter for your mortgage.
This letter not only shows the seller that you’re a serious buyer but assures them that you qualify for a house loan and that reassurance can give you extra points should a bidding war arise.
5. Don’t be in a rush
Today, many people are getting really eager to buy a home, especially because of the really low interest rates on mortgages. But this doesn’t necessarily mean that now is the perfect time for you to start hunting for a home.
“You don’t want to end up in a position where you’re rushing to buy a house. People are acting like it’s their last chance, and it’s not their last chance. There will still be houses next year,” said Jennifer Beeston, a mortgage educator and real estate industry veteran about the sudden rage in purchasing a house.
Mortgage rates are bound to remain low for quite some time, so give yourself enough time to find the right home for you and your family. You don’t need to settle for less just because you want to take advantage of the season. You’ll definitely end up buying a home that you love and can also easily afford by just following these few tips.