According to real estate top economists, there will be an increase of first-time homebuyers on the market in 2021. According to these predictions work from home Millennials will be looking to purchase single-family homes in mid-size cities and suburban areas that are not densely populated. Chapel Hill, Raleigh Durham, and the surrounding areas are likely to witness continued demand for single family homes and new homes. If you fall into the first time home buyer category, are considering going from apartment to single-family home, and are looking in the Triangle Area, we have some key questions to ask yourself before you start a home search in earnest, with a realtor. These questions will prepare you for the buying process and help make your offers stronger against other offers in a seller's market.
Do you have Proof of Stable Income?
The past years have witnessed many changes in income types and it is more difficult to determine what is a stable income. Many millennials report income from various sources with the rise of the gig economy, not to mention changes due to Covid 19. When purchasing a home, lenders will ask for proof of two years of stable income, if you are employed by multiple sources, and many seek a record of the down payment deposited in your account for at least 60 days, according to this report on Money.com. The more proof you have of your eligibility, the better. 2021 is still going to be a seller's market and having your documentation prepared and ready is the best way to ensure that you will not miss out on the house of your dreams.
Have you saved enough for a down payment?
Traditional advice is to save for a 20% downpayment for a home, however, today lenders will accept as little as 3-6% according to Rocket Mortgage. This number is not wholly accurate. When lenders accept less than 20%, they often require Private Mortgage Insurance, which adds additional interest on your mortgage payments of .5-2%. Put as much down on a home as you can. The interest paid over the long term will be less and you will have an easier time with financing. When you are starting your search and you have the money put aside for a down payment, 20% is still a good general rule of thumb.
Are you invested in a neighborhood or area?
According to the National Association of Realtors, the median length of homeownership is 13 years, if you are not invested in an area, with family, work, or friends, maybe it is not the place to buy or time to buy. As mentioned above, the down payment necessary plus closing costs are significant and if you are not considering remaining in one place, renting may be a better option. Another consideration is whether the area is undergoing change and you expect a property to appreciate. Buying a home should not be purely speculative, but it is best to invest in an area and property that is not likely to lose its value. We offer neighborhood guides in the Triangle Area to help give you an idea for the types of real estate and the history of an area, in addition to its' amenities for your lifestyle. Click Here.
Are you Managing Your Debt and Actively Building Credit?
As with saving for a downpayment, your credit fitness is going to play a role in your eligibility for a mortgage. Do you pay your credit cards on time? Do you have multiple lines of credit? If you have not begun actively monitoring and improving your credit score, start! No credit history is not a good thing, and balanced types of credit paid on time can help qualify you to lenders. Using a free service, which there are many, can help you increase your credit score easily. For home buying, the optimal credit score is upwards of 740 with a debt to income ratio of 28%. We have a comprehensive blog on this subject here.
Are you putting away funds for savings or emergencies?
Savings should be for more than a 20% downpayment, an emergency amount of savings is necessary when you own a home. Even if you have insurance that would pay damages in the event of a disaster or accident, claims can take weeks or months to file and you might need to vacate the home. Further, if you purchase a home and did not go through a rigorous inspection process, home repairs might cost more than you anticipate. According to Home Advisor, homeowners spend $3,192 per year on maintenance and $1,640 on emergency repairs. In addition to your downpayment, having an extra $4,000-5,000 should ensure that you are prepared in the event of an emergency.
Have you checked to see if you are pre-qualified for a mortgage?
If you have been saving, are comfortable investing in a neighborhood or area, then checking to see with a lender what you are qualified is a great next step. Experts recommend that you spend up to 28% of your gross monthly income on a mortgage payment with a mortgage payment comprising 36% of your total debt. There are hundreds, if not thousands, of online mortgage calculators, we offer a guide to affordability here. Check your online eligibility, then compile proof of income, down payment, and contact a lender. Pre-qualifying for a mortgage in this market will place your offers ahead of others where they would be waiting on the status. My NC Homes has great relationships with area lenders and are happy to recommend our specialists.
Home buying is arguably the biggest investment in your life. It is also where you spend the majority of your life, especially if you work from home. We offer over 50 years of combined expertise in buying and selling real estate transactions in the Triangle Area and are happy to guide you through this process. Our expertise in negotiating for new homes and existing homes in a seller's market has made us go to realtors in the Chapel Hill and Raleigh Durham area. Let's take this first step together, call us today to get started!Posted by Larry Tollen on