5 Ways to Win a Real Estate Bidding War without the Highest Bid

You may shortly find yourself in a real estate bidding war if you’re one of the many first-time homebuyers looking to buy in competitive markets like Austin, TX or Denver, CO. You may also think the only way to win the house is by putting in the highest offer. While this sounds like the right and possibly only strategy, you might be surprised when a homeowner selects a lower bid. 

Winning a real estate bidding war doesn’t always come down to price – there are actually many other tactics that are extremely effective. All-cash offers, pre-approval letters, and flexible timelines are all strategies that can beat out the highest offer. When you’re planning your bidding strategy, consider the following tactics to help make your offer stand out amongst the competition.

1. Get pre-approved for a mortgage

One of the first steps you should take towards purchasing a house is obtaining a pre-approval letter. A pre-approval letter states that a lender is willing to lend money up to a certain amount. These are typically acquired from a mortgage company or a bank. 

Getting pre-approved is almost always beneficial when buying a house, but especially if another buyer puts in a large offer during a real estate bidding war, but isn’t pre-approved. By having this letter, you can show the seller that you’re a qualified and serious buyer, even if you don’t have the highest bid. Pre-approval letters typically have an expiration date of 30 to 60 days, however, they can be updated with reverification of your information.

2. Go in with an all-cash offer

We’ve all heard the term “cash is king,” and when it comes to real estate bidding wars it’s no different. Having cash on hand means that mortgage companies don’t need to get involved, escrow closes faster, and you don’t have to worry about appraisals. All-cash offers show the seller you mean business and are ready to buy the house today.

3. Provide a flexible timeline

Flexibility around specific details in real estate transactions is nearly as good as offering the highest bid. Sometimes sellers need more or less time in the home than the typical 30-day closing period. If you are not in a rush to move, be flexible with your closing timeline and let the seller decide when works best for them. This can go a long way in a real estate bidding war especially if competing offers come in with hard deadlines. 

4. Eliminate contingencies during a real estate bidding war

Of course, there will always be contingencies when buying a house. Home inspections, financing, and appraisals are all important, however, you want to make sure that you aren’t overwhelming the seller by asking for too much. If you want to be the victor in a bidding war without the highest offer, you should remove as many contingencies as possible. However, it’s important to note that as you eliminate contingencies, you’re effectively taking risk off the home seller (which is why it’s a winning strategy) and putting it instead on yourself. 

5. Write a personal letter about why you are the perfect homeowners

Almost all sellers want to make sure their home is going to people that will take care of it and love it as much as they do. Including a personal offer letter, complimenting recent renovations, stating why you would be the perfect caretakers, and sharing what you love about the home, will help you stand out. It won’t always make a major difference, but this personal touch can help compliment an offer even if it’s not the highest bid. 

Real estate bidding wars can be extremely competitive, but implementing these five strategies can help your offer stand out. You should also consult with your real estate agent, as they may have additional insight on how to make your offer more attractive. In the end, the sellers are going to choose the offer that’s most attractive to them, so do whatever you can to make your offer the best on the table.

Source: redfin.com

Bidding wars heat up, but buyers are undeterred

Home buyers in the U.S. are facing increasingly fierce bidding wars, but even as prices rise and competition heats up, they’re not giving in.

A new survey by the National Association of Home Builders last week found that around 40% of prospective home buyers have been unable to purchase one because they keep getting outbid, CNBC reported. One year before, the main reason people couldn’t find a home to buy was due to unaffordable prices.

A second survey by Redfin found that 56% of its agents said they’ve faced a bidding war when making offers on behalf of their clients. It seems that bidding wars occur most frequently on higher priced homes in the $800,000 to $1 million region, Redfin reported.

Redfin’s chief economist Daryl Fairweather said he expects bidding wars to become more common this year, involving even more buyers.

“The best thing buyers can do is prepare: Prepare to see homes quickly as soon as they hit the market; prepare by talking to a lender and getting preapproved; and prepare by talking to your agent about how much a home you like is worth so you can go into a bidding war with your strongest offer tactics, but know when to back away if the price escalates more than you’re willing to pay,” he said.

The Redfin survey found that Salt Lake City, where 90.2% of all bids face competition, sees the most bidding wars, followed by San Diego (78.9% of all offers), the San Francisco Bay Area (77.1%), Denver (73.9%) and Seattle (73.8%).

CNBC said that bidding wars are being driven by a combination of record low mortgage rates and low inventories in most housing markets. The number of homes for sale in the U.S. was down 43% in January from one year ago, it said.

“Lower mortgage rates are making monthly payments for higher-priced homes more manageable,” Danielle Hale, realtor.com’s chief economist, told CNBC. “But finding a home that checks the right boxes amid limited supply, and saving up for the larger down payment needed with higher home prices, continue to be challenging, especially for first-time home buyers who haven’t accumulated home equity as prices have gone up.”

Source: realtybiznews.com

These People Rushed to Buy Homes During Covid. Now They Regret It.>

Stella Guan spent months searching for a home to buy, getting outbid again and again in the white-hot real-estate market of the Los Angeles suburbs. Finally, her offer on a “beautiful” Santa Clarita house was accepted in August, she said. The graphic designer, 30, paid roughly $600,000 for the house. But after sleeping there for only a few nights, she had an unfortunate realization. “I was like ‘uh-oh, I hate this house,’ ” she recalled. “I hate this house so much.”

Looking back on it, she said, “I should have seen all of the warning signs, but the pandemic housing fever got the better of me.”

Stella Guan purchased this home in Santa Clarita.

Photo: Stella Guan

A house, unlike expensive jewelry or clothing, can’t be returned if the buyer is unhappy with it, so a cardinal rule of home buying is that you shouldn’t rush into a purchase. But in 2020, millions of Americans did just that.

Fleeing small apartments, buying vacation homes or simply looking for a change of scenery amid the crushing boredom of lockdowns, people scrambled to buy houses amid the pandemic, spurring bidding wars and supercharging real-estate markets across the country. Now, many are discovering the pitfalls of these hasty purchases, ranging from buyers’ remorse and financial strain to damage caused by unexpected problems.

This spring especially, “people were so panicked,” said Priscilla Holloway, a Douglas Elliman agent in the Hamptons, a popular spot for New Yorkers seeking refuge from the pandemic. “Buying a home is a huge commitment. You have to be thorough. But people were getting all crazy, and they weren’t as thorough as they usually are.”

Many home buyers were apartment dwellers looking for larger spaces to shelter in. “It was a land grab for houses,” said Cheryl Eisen, CEO of the interior-design and property-marketing firm Interior Marketing Group. “People wanted out of apartments.”

At the same time, inventory dropped as many homeowners hesitated to list their properties in the pandemic. The result is that much of the country saw a price spike and bidding wars, brokers said, leaving buyers with little to choose from. In these conditions, many are tempted to waive inspections or skip other due diligence they would normally perform before buying a home.

The newly purchased home of Richard and Meaghan Weiss in Northern California.

Photo: Helynn Ospina for The Wall Street Journal

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Ms. Holloway said she helped a family move this summer after discovering that the Hamptons house they had just bought had an infestation of wasps nests in the backyard. The family didn’t find the wasps until after closing because they had waived the inspection in the midst of a bidding war, said Ms. Holloway, who wasn’t representing them at the time. Deciding the property was unsafe for their young children, they immediately put the Westhampton Beach home on the market. Ms. Holloway and a colleague helped them find another house to buy.

Over the past two years, the insurance company Chubb has seen large, non-weather-related losses increase in frequency and severity, according to Fran O’Brien, division president of Chubb North America Personal Risk Services. She attributed these losses in part to hasty home purchases: Buyers moving from a small city apartment to a large home in a rural area may not be well versed in how to prevent the pipes from freezing, for example.

“People are moving to places that they don’t know a lot about,” Ms. O’Brien said. “They’re thinking, ‘this looks like a nice place to live’ for amenities it may have. They don’t understand what risk there could be with that home.”

People are even more likely to overlook those risks, she said, when they are in a hurry to snap up a home before someone else does. “You run into this lack of awareness and lack of time, which is not a good combination.”

A HomeAdvisor report found that Americans did an average of 1.2 emergency home repairs in 2020, up from 0.4 in 2019, while emergency home spending jumped to an average of $1,640, up $124 from the 2019 average.

Nature had an unpleasant surprise in store for Richard and Meaghan Weiss when they bought their first home in Northern California after moving from Brooklyn.

When Covid hit, the couple left their Brooklyn apartment to stay with Ms. Weiss’s parents in Sonoma, Calif. Ms. Weiss was pregnant and they had a toddler at the time. “Being cooped up in an apartment, not being able to see people in New York, sounded like a miserable existence,” said Mr. Weiss, 40, who works in commercial real estate.

After a few months they decided to relocate permanently to the Bay Area, where Ms. Weiss grew up, and started looking for a home to buy. They found the market to be “super-duper competitive,” Mr. Weiss said. They were outbid on one house and backed out of a contract on another when they found out it had serious foundation issues.

Finally, they were able to buy a four-bedroom house they loved in the East Bay, paying about $100,000 over the $1.89 million asking price to beat out another bidder. “We were a little bit overeager because we’d been burned twice,” he said. “We probably didn’t do the due diligence we should have and looked at everything as thoroughly as we probably should have.”

The Weiss family.

Photo: Helynn Ospina for The Wall Street Journal

They closed on the hillside house in November. When they returned a few weeks later to move in, “we see all these holes in the siding,” Mr. Weiss said. On closer inspection, they found that the wood on one side of the house was “absolutely devastated,” with some 90 holes in it. It turned out that the culprits were acorn woodpeckers living in the large oak trees surrounding the house. “Come to find out, it’s a systemic problem in the neighborhood,” Mr. Weiss said.

The seller hadn’t said anything about the birds, he said, and coming from Brooklyn, he and his wife didn’t know to ask. Since then, they have tried various deterrent devices and consulted with exterminators, but the only permanent solution is to replace the home’s wooden siding with cement at a cost of roughly $150,000.

If it weren’t for the frothy pandemic market, Mr. Weiss believes they would have discovered the problem before closing. “I think we would have been slower and more thoughtful and more methodical,” he said. “Buying a home becomes emotional. Because we were emotional from losing the first two and the competitiveness, we just kind of dropped our level of diligence and plowed through.”

Ms. Guan started bidding on houses in the L.A. suburbs even before she moved there from the New York City area in July. She had a good experience with her first home purchase, a New Jersey condo, and with interest rates low, she was eager to jump into the California market. “I thought it’s going to be the same as New Jersey. I’ll enjoy the ownership and make money in a few years.”

The Weisses had nearby branches trimmed in an attempt to keep woodpeckers away from the house.

Photo: Helynn Ospina for The Wall Street Journal

But she arrived in L.A. to find “the most insane housing market I’ve ever seen,” she said. Every house seemed to get 15 or 16 offers, she said, and sell for $100,000 over its asking price. Her offer was eventually accepted on a circa-1975 house with a renovated kitchen in Santa Clarita. At that point, she had been outbid on seven other houses, she said, so she was determined to get this one, even when the inspection revealed toxic black mold and asbestos. “I was really trying to get out of where I lived,” she said. “I spent five to six months looking. All of these factors made me say, ‘OK, I have to just face it, I can’t back out.’ ”

She sold the house a few months after buying it. After the repairs, agents’ fees and transaction costs, she said, “I lost a lot of money.” She now lives in a rented studio in L.A.’s Koreatown, where she said she’s much happier. “It still hurts,” she said, but “it’s just good to have my money back and move on to other things. And never see the house again.”

Write to Candace Taylor at Candace.Taylor@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the February 12, 2021, print edition as ‘Haste Makes Waste When It Comes to Homes.’

Source: wsj.com

First Time Homebuyer? 6 Home Buying Myths to Look Out For – Redfin

Buying your first home is often a dream for many renters out there. But with all the information about how to buy a home, it can be easy to believe some of the home buying myths. Whether you’re looking to buy a house in Seattle, WA, or a condo in Miami, FL, you’ve probably heard some of the myths surrounding how much you’ll need for a down payment or how high your credit score should be. 

Before you set your sights on your dream home, make sure you know just what separates the home buying myths from the facts. You may realize that you’re able to buy your first home sooner than you think.

home-buying-myths

home-buying-myths

MYTH 1: You need a 20% down payment

The biggest home buying myth for any first time homebuyer is that you need a 20% down payment to buy a home. In many cases, your down payment can be as low as 3.5%. Common types of loans with low to no down payments include FHA, VA, and USDA loans. With FHA loans – loans designed for individuals with a low-to-moderate income level and credit score- your down payment could be as low as 3.5%. For veterans and current service members, VA loans offer no down payment mortgages, and those looking to buy a home in a rural area may qualify for a no down payment USDA loan. 

Aside from loans, down payment assistance programs can help you lower the cost of your down payment. These programs are available nationwide, statewide, or locally in your county or even city. Down payment assistance programs provide a wide range of assistance types such as second mortgages, forgivable loans, or grants covering partial to full costs of your down payment. Your real estate agent or mortgage lender can help you determine what down payment assistance you qualify for. 

If you do have the means to purchase a home with a 20% down payment, there are benefits to consider. For starters, you won’t need to factor in private mortgage insurance (PMI) to your budget. PMI is an additional cost your mortgage lender may require if your down payment is below 20% and the cost is factored into your monthly mortgage payment. However, it’s always a good idea to talk with your financial advisor or wealth manager to determine your finances and whether a 20% down payment is the right option.

MYTH 2: Renting is cheaper than buying a home

One of the most common home buying myths is that renting is cheaper than buying a home. If you’re deciding whether to make the transition from renter to buyer, you might believe that renting is the less expensive option. However, in some cities the cost of renting a home may be less than or equal to a monthly mortgage payment.

If you’re serious about buying a home, you may end up saving money in the long run if you buy a house rather than continue renting. To compare the costs of renting versus buying a home, you can use a rent vs buy calculator to determine which option works best for your circumstances.

MYTH 3: Your credit score needs to be perfect

Home buying myths centered around credit scores often run rampant, specifically the myth that you must have a great credit score to buy a home. Luckily, that’s not always the case. If your credit score is at least 580, you may qualify for a 3.5% down payment FHA loan. For those looking at USDA loans, your credit score should also be a minimum of 580. VA loans actually have no minimum credit score, but instead require lenders to look at the whole loan profile of a homebuyer.

Generally speaking, if your credit score is higher you’ll likely have more options when it comes to qualifying for a conventional loan. With a higher credit score, you may also find that the terms of your loan or interest rates are better. However, just because your credit score isn’t great doesn’t mean your homeownership dreams need to come to a halt.

MYTH 4: All mortgage lenders offer the same rate

First time home buyers may have the belief that every mortgage lender will offer you the same rate no matter where you go. When shopping for a mortgage, it’s always a good idea to get more than one quote. Not every mortgage lender will offer you the same – or even the best- loan terms. To avoid making this mistake, it’s important to get quotes from several mortgage lenders and find the one that’s best suited for your finances and homeownership goals. 

MYTH 5: Home inspections are optional

Especially if there are bidding wars, it can be tempting to skip a home inspection to make your offer stand out. However, home buying myths like these may cause more issues down the road. More often than not, mortgage lenders will require a home inspection before you buy the home, so you may not even have the chance to consider passing on a home inspection.

In the case that your lender does not require an inspection, this doesn’t mean you should skip it. It’s important to know the condition of the home you’re looking to buy. That way you’ll be aware of any damage or issues the house may have before becoming the owner. If a home inspection does find any significant damage, you may be able to negotiate with the seller to repair the issues or lower your asking price. 

MYTH 6: The listing price is non-negotiable

A home buying myth that some first time homebuyers believe is that the listing price is set in stone. Depending on the housing market, you may need to be prepared to spend more than the home’s list price or negotiate for a lower price. If you’re buying in a seller’s market– where there are more buyers than homes available- you should be prepared to make an offer that’s higher than the listing price.

If it’s a buyer’s market- where there are more homes available than buyers looking to purchase- you may be able to negotiate for a lower price than what’s listed. Either way, believing the home buying myths about listing prices may cause you to lose out or even overspend on the home of your dreams.

Source: redfin.com

How to Price Your Home in Arizona

When you’re getting ready to sell your home, it can be overwhelming. There’s so much to do, including packing up your home, finding a real estate agent, and getting your home listed. When it comes to listing, pricing your home can be confusing, especially in a hot and diverse market like Arizona.

There are multiple factors that come into play when you’re trying to determine how to price your home in Arizona, and it’s never as easy as looking at online estimates about what you can get. You want to get it right; if you come in at a price too high, it can limit the number of potential buyers who show up to tour your home. If you come in too low, however, while you might find a lot of interested buyers, you could potentially cost yourself tens of thousands of dollars.

There’s a lot on the line, so we’re going to go over how to price your home in Arizona so you can sell it quickly for the highest price possible.

Don’t Abide Only by the Estimates of Third Party Sites

Some real estate sites allow you to look up any home and see an estimate for what it’s currently worth. They typically look at the price the house last sold for and factor that into changing trends in the area in general. While factoring in trends over time to assess your current home’s worth isn’t a bad call, the reality is that these sites don’t have enough information about your home to be the final determination.

These sites don’t track major upgrades to a home that drastically affect value, like the addition of a privacy fence in the yard or a remodeled master bath. Conversely, if your immediate neighbor’s home sells for 350k, they may assume that yours could get close to that… despite the fact that they had fully remodeled the interior while your home has the same build-grade interior from 20 years ago.

While these numbers can be a solid starting point, take them with a grain of salt until you consult a professional.

Instead, Talk With a Agent to Get Your Comparative Model Analysis (CMA)

When you’re looking at pricing your home, the best thing you can do is to start with a comparative model analysis (CMA). To do a CMA, you’ll need to talk with an agent. When you work with a Homie agent, they’ll look at similar homes around you to determine what your home is worth. They look at all the details that could impact prices. They factor in upgrades, amenities, and the home’s age. All of this information is then used to come up with a good price for you.

It’s important to factor all of these variables into play. Your neighbor may have the same size home you do, for example, but the two homes could be in drastically different shape, even if they had the exact same square footage and layout. Looking at images of the home and listed amenities (like new piping or a one-year-old AC unit) in addition to the standard metrics will help determine the true value of your home.

If you’re curious about what your home is currently worth, including all those details that are a part of a Comparative Model Analysis, Homie offers a free home value report. Click here to request your report from our team of experts.

Never Assume There Will Be a Bidding War

In hot markets, bidding wars aren’t uncommon. A seller may receive multiple offers at break-neck speed that exceed the original listing price on high-value, in-demand homes. While bidding wars could happen on any property (especially in currently in-demand areas like many places in Arizona, where more people are moving into the state), you don’t want to rely on a bidding war to happen in order to get your true target cost. Intentionally listing the property at a lower value than you should, in hope of inciting a bidding war, can backfire and cost you significantly in the process.

Work With a Real Estate Agent

There are clearly a number of factors to consider when you’re selling your home, and Arizona is currently a hot market that’s moving quickly. Working with a licensed real estate agent can help you at every point of the selling process, including the all-important step of pricing your home correctly.

Local real estate agents, like the ones at Homie, live and breathe home prices. They’re extremely familiar with market trends in your immediate area. They know how in-demand housing in your city is, and how valued homes in your actual neighborhood are. They’re also aware of things that are hard to track through pure data alone, such as the increased value of an open floorplan that most people want, for example, or what (if any) small upgrades you should make to your house to make a big impression.

Turn to a Homie

Homie has experienced, licensed agents in Arizona who charge an affordable, set flat fee for selling your home. Here at Homie, we know the market well and will help you ensure you’re pricing your home competitively while still getting every penny for it that you should.

Selling your home is a big decision, and deciding what price to list your home at is a crucial part of the process. Any home that you’ve bought is an investment, and you want to treat it as such. The steps laid out above can help you price your Arizona home well, especially when you’re working with an experienced local real estate agent.

Looking for help when deciding how to price your home in Arizona? Learn more about how Homie’s real estate agents can save you thousands and sell your home quickly here.

Get more tips for selling your home in Arizona!

How To Find a Real Estate Agent in Arizona
Arizona Home Buying and Selling Webinars
The Best months to Plan a Move in Arizona

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Source: homie.com

Is now a good time to buy a house? What home buyers in 2021 should know

2021 is a great time to buy a house, for some

There’s never been a home buying market like this one.

The ongoing COVID-19 pandemic has made 2021 a singular time to become a homeowner if that’s one of your goals this year. 

Mortgage rates are still near record lows, and work-from-home policies mean buyers have more flexibility to choose where they’ll live. 

However, high unemployment and an uncertain economy could make it hard for some buyers to get financing. 

So, is it a good time for you to buy? Here’s what you should know.

Verify your home buying eligibility (Feb 10th, 2021)


In this article (Skip to…)


The 2021 housing market: An overview 

Interest rates plummeted to historic lows last year, and they’ll likely remain low for the next couple of years.

That’s great news for borrowers — it means lower monthly mortgage payments and bigger home buying budgets.

However, low rates have also generated more bidding wars and driven home prices up. There are fewer homes on the market and house hunting has become more competitive.

You’ll likely have to move fast when you find your dream home.

And you should figure out ahead of time how much over the asking price you’re willing to pay if it comes to that. 

Low interest rates can help buyers afford more expensive homes. But they also create more competition in the market.

The massive move to work-from-home may also have you thinking about a place with enough space to accommodate a home office, or simply spread out a little now that everyone works, studies, and socializes from their living rooms.

Work-from-home policies have given many people the freedom to reconsider where they live, allowing them to relocate to less expensive or otherwise more desirable areas without sacrificing their jobs. 

Whatever your reasons for entering the housing market, 2021 could be your year to become a first-time home buyer.

Below, we’ll address some key questions and concerns you may have about buying a house during the pandemic. 

Is buying a house during COVID a good idea? 

The decision to buy a house has less to do with the broader economy and more to do with your financial situation.

Buying a house during COVID might be a good idea if you: 

  • Earn a steady income
  • Have dependable employment
  • Have a credit score in the 580-620 range or higher
  • Have money saved up for a down payment and closing costs
  • Have a low to moderate debt-to-income ratio (DTI)

In the current economy, employment and income stability are key.

Mortgage lenders want to see that your income will continue at its current level for at least 3 years after closing.

If you were recently laid off then hired back, had hours cut, or work in an industry heavily impacted by COVID, you’ll likley have a harder time getting a mortgage right now. 

But there’s an upside to buying a house during COVID.

Assuming you have good credit, you may be able to secure an ultra-low mortgage rate this year. This could lower your monthly payments and save you thousands of dollars over the life of the loan.

But you don’t want to rush into a purchase based on interest rates alone.

A mortgage is a long-term commitment, so make sure you’re financially ready, regardless of what’s happening in the real estate market. 

Verify your home buying eligibility (Feb 10th, 2021)

What’s different about buying a house during coronavirus? 

As sellers, real estate agents, and lenders comply with social distancing mandates and work to keep themselves and their teams safe, you may find that some aspects of the home buying process have gone online.

For instance, some sellers or agents may offer virtual tours rather than in-person showings, and you may opt for an online mortgage application rather than applying at a brick-and-mortar bank or lender.

Depending on who you work with and where you live, the home inspection and closing process may happen virtually as well. 

Your home buying prospects could also depend on your profession in 2021.

If you work for yourself or have non-traditional income (such as being a gig worker or seasonal worker), some lenders may be reluctant to work with you right now because they’re more risk-averse due to COVID.

However, you can ask lenders about your situation before submitting an application, and they can advise you on exactly what documents and income proof you’ll need to qualify.  

If you have a steady, reliable income and your business is not at risk during COVID, you should still be able to get a loan. If one lender denies you simply because you’re unemployed, try again with a few others that will look more holistically at your application.

Are you eligible to buy a house this year?

If you’re wondering whether you should buy a house this year, the first place to look is your personal finances.

Factors like your credit score, savings, income, and debts will determine whether you qualify for a mortgage, and how much house you can afford.

How much down payment do I need? 

Expect to put down at least 3% to 3.5% on your new home.

If you’re buying a home worth $300,000, that means you’ll need at least $9,000 to $10,500 saved for a down payment.

You need to budget for closing costs, too. These typically add 2% to 5% of the purchase price to your upfront fees. That’s another $6,000 or more on a $300,000 home loan.

Keep in mind, mortgage loans with less than 20% down charge private mortgage insurance (PMI). This adds to your monthly bill, but can help you buy a home much sooner.

Can I buy a house without a down payment?

If you’re a veteran, or if you are buying in a rural area and meet certain income limits, you may be able to qualify for a 0% down payment VA loan or USDA loan.

VA loans are typically reserved for veterans, service members, and their families. USDA loans are available in designated rural areas and were designed for low- to moderate-income buyers

If you’re not eligible for a VA or USDA mortgage, a down payment assistance program can help you close the gap and qualify for a mortgage.

Down payment assistance programs vary by state and county, but they often provide help in the form of grants or forgivable loans that may be used toward buying a home.

In some cases, the programs include cash or a loan toward a down payment, as well as help with closing costs. 

Check your low-down-payment mortgage options (Feb 10th, 2021)

What credit score do I need to buy a house? 

The minimum credit score to qualify for an FHA loan is 580. You’ll typically need a 620 FICO score to be considered for a conventional or VA mortgage. And USDA applicants must have a score of at least 640.

Keep in mind, the higher you can get your credit score before applying for a mortgage, the better the interest rate you’re likely to get.

A high score indicates good financial habits, and lenders factor it into their lending decisions and the rates they offer. 

Can I buy a house on unemployment? 

Generally speaking, you will not be able to buy a home on unemployment income.

Lenders need to verify your income when you apply for a mortgage. They want to know it will remain steady once they’ve made the loan. Since unemployment is a temporary benefit, lenders can’t use it to qualify you. 

However, you may be able to get a mortgage if you’re unemployed but you have a documented offer of employment that indicates how much you’ll be earning once you start the job.

Mortgage lenders will also look at your credit score and your payment history while you were unemployed, as well as your down payment amount.  

Can I buy a house with student loans?

Yes, you can buy a house with student loans. However, those loans factor into your debt-to-income ratio, which is a key metric lenders use in approval decisions.

If your student loan payments take up a significant amount of your monthly income, you may have a more difficult time getting approved for a home loan. 

There are ways to improve your chances, though.

Consider loan consolidation or applying for a graduated repayment plan. Either of those options may reduce your monthly obligations, at least for a time, and that can get you to a more favorable DTI.

If you can save more than 3% for a down payment, that may help as well, since a smaller loan means less risk for borrowers.

As a first-time home buyer, you may also want to look at small homes with lower price points. That may help you secure a loan, and it can also keep your mortgage payments manageable while you continue paying down your student debt. 

Do you have to be married to buy a house? 

No, you do not have to be married to buy a house. You can qualify for a mortgage as an individual borrower, or you can buy a home with a partner to whom you are not married.

Buying a home as a single borrower simply means you need to qualify for the loan on your own merits. You will not have a partner’s income to supplement your budget.

If you’re unmarried buy want to buy a home with a partner or roommate, you can apply for the loan as co-borrowers and count both your incomes toward the mortgage.

As long as you qualify for the mortgage, it’s no harder to buy a home when you’re single than when you’re married.

Verify your home buying eligibility (Feb 10th, 2021)

The home buying process in 2021

What’s the first step when buying a house? 

The first step toward buying a house has not changed during the COVID pandemic. Potential home buyers should start by getting pre-approved for a mortgage.

A preapproval letter does not guarantee that a lender will work with you, as they will vet your finances more closely during the formal application process.

But it does give you a sense of whether you’ll qualify for financing, as well as how much you might be able to borrow.

Not only does this help you focus your home search on properties you can afford, it tells real estate agents and sellers that you’ll likely be able to go through with a purchase once you’ve made an offer. 

Do I need a real estate agent to buy a house?

You don’t need a real estate agent to buy a house, but they can be quite helpful. A real estate agent generally has deep knowledge of the local market, and they do a lot of the legwork for you.

Once you’ve told them your price range and the type of property you want to buy, they can scour listings for suitable homes and arrange showings for you.

A real estate agent or Realtor can also negotiate on price and help you hone your offer, not to mention manage a lot of paperwork and logistics on your behalf. 

The exception to the real estate agent requirement is if you buy an FHA foreclosure property. In that case, you must be represented by a real estate agent. 

Can I make an offer on a house without seeing it in person? 

Yes, you can make an offer sight-unseen, meaning without seeing the home in person. In fact, this is pretty common.

Buying a house sight-unseen has become particularly common in cities such as Los Angeles and Denver, where desirable homes get sold very quickly. In competitive markets, a sight-unseen offer may be your only chance at nabbing a property that has caught your eye.

But there are risks to doing this. Visiting a house in-person gives you a close look at the features and flaws of the home, and it allows you to get a sense of the neighborhood and what the property looks like when it’s not being professionally staged.

Making an offer before you’ve been to the home means you could be on the hook for a home you don’t like or that needs more work than you expected. 

Can I buy a house remotely?

You may be able to buy a house remotely, depending on the seller, agent, and lender’s policies.

Some listings may include a virtual tour option, and with so many lenders offering online applications, keeping your distance has never been easier. Some appraisers and inspectors will do curbside or virtual appointments rather than going inside properties. 

If your lender offers virtual closings, you can finalize your loan and take possession without needing in-person meetings.

But there are downsides to a remote purchase as well.

If neither you nor your home inspector or appraiser has taken a good look at the property, you could miss red flags that would have made you reconsider the home or at least negotiate the price. 

Common financial questions for first-time buyers

Many first-time home buyers focus on their down payment. But there are all sorts of other fees associated with buying a home — some optional and some not.

What are the fees associated with buying a home? 

When you buy a home, you’ll pay closing costs of roughly 2-5% of your mortgage loan. These can include: 

  • Lender origination fee
  • Mortgage points (optional)
  • Prepaid property taxes and homeowners insurance
  • Inspection fees
  • Appraisal fees
  • Title fees 
  • Homeowners Association (HOA) fees 

You may be able to negotiate some of these fees with your lender.

In some instances, your seller may be willing to pay your closing costs in exchange for your willingness to pay full price or more than their asking price.

Or, you can ask your lender to cover part of your closing costs and pay a slightly higher interest rate in exchange. This is known as a “lender credit.”

Before choosing a loan, get quotes from several lenders and compare the loan estimates they provide you.

A Loan Estimate will break down all of the costs and fees associated with the loan, so you can do a side-by-side comparison to see where you’re getting the best deal. 

Get a custom Loan Estimate (Feb 10th, 2021)

What are points when buying a house? 

Discount points are a fee you can pay upfront to lower your mortgage interest rate.

One point typically costs 1% of the loan amount and lowers your rate by about 0.25%.

Paying points is optional, so if you don’t have extra cash to put down when you take out your mortgage, you can still go ahead with the loan.

If you’re worried about interest costs but don’t want to pay for mortgage points, you can consider refinancing once you’ve built up equity in the house. 

What is earnest money? 

Earnest money is essentially a deposit you put down to show you’re serious about buying a house. It’s typically paid when the seller accepts your offer.

This money is not pocketed by the seller. If you move forward with the home purchase, the earnest money goes toward your down payment.

In a competitive market where homes go quickly, offering earnest money can help distinguish your offer from those of other buyers.

If you’re buying in a rural area or a slow market, your offer may be accepted with an earnest money commitment of $1,000 or less. But if you plan to purchase in an in-demand area, be prepared to offer much more than that. 

Do you get a tax break for buying a home? 

The Biden Administration has proposed a $15,000 tax break for first time home buyers. But as of this writing, the measure has not yet been passed.

You may be able to deduct the interest you pay on your mortgage on your annual tax return. This benefit only applies if you do not choose the standard deduction and you instead itemize your deductions.

Taxpayers who itemize their deductions and are single or married and filing jointly can deduct interest paid on up to $750,000. Those who are married and filing separately may deduct interest paid on up to $375,000. 

Do I qualify to buy a house now?

The best way to find out whether you qualify to buy a house is to assess your credit score and your current debts. If your score is 580 or above and your debts are relatively low, it might be a good time to buy a home.

To learn more about your options, apply for a pre-approval to find out how much a lender may let you borrow.

Be sure to request quotes from several mortgage companies and compare rates and offers before you buy. 

Verify your new rate (Feb 10th, 2021)

Compare top lenders

Source: themortgagereports.com

Expert Homebuying Tips for Buying in a Seller’s Market

According to buyer protection laws in most states, sellers are required to report any findings in home inspections to subsequent buyers. In other words, if an inspector finds something wrong with the house, the seller will have to deal with it one way or another— either with you, or the next buyer should you choose to drop out of the deal.
When trying to woo your seller in a competitive market, it helps to make a generous earnest money deposit. An earnest money deposit is a good-faith deposit requested by the seller when you enter into a contract to buy the house and typically run anywhere from 1% to 3% of the sale price of the home.
This might sound crazy, but making a good impression on your new neighbors can actually make a difference when it comes time for a seller to review offers.

Get a Pre-Approval Letter

Larissa Runkle is a contributor to The Penny Hoarder.
Another way to win over your seller (and prevail in any bidding wars) is by keeping your contingencies to a minimum.
“In a really aggressive seller’s market, a home buyer who has to sell a current property should do so before placing an offer on another home,” said Jason Gelios of Community Choice Realty. “Don’t always assume that the seller will take the highest price. Other conveniences can play a factor in gaining the seller’s attention, especially things like faster closing times and less restrictions.”
In order to be competitive in a hot seller’s market, you will need to line up your financing in advance.
Source: thepennyhoarder.com

Be Friendly With Neighbors

Let’s say the listing price on your dream home is 0,000 and you’re able to put down a 6% down payment. That leaves you with a mortgage of roughly 1,000. For a 30-year fixed mortgage at an interest rate of 3%, that translates into ,269 monthly payments. Now let’s say you decide to bid a little higher on the home and offer ,000 over asking price. This would only bump up your monthly payment (assuming you qualify for that low interest rate) by .
Contingencies are the contractual stipulations buyers and sellers must meet before the deal can close. Unsurprisingly, sellers don’t like to have too many of them to deal with. Contingencies can include such things as requesting a seller to make certain repairs, getting a home inspection, or even the fact that you’ll need to sell your old house before being able to buy the new one.
If that sounds fast, it is. But by the time we submitted our offer, the seller already had three others. This is where it helps to have a great real estate agent on your side.

Submit an Offer Quickly

I was in this exact position last fall. Here are seven key takeaways from my experience buying in a seller’s market.
While my partner and I didn’t make the highest offer on our house, we did have the fewest contingencies — mainly, we didn’t ask too much of our seller in the way of repairs, or have another house to sell in order to afford the new one.
After you’ve seen a house, and decided you love it, be prepared to submit an offer quickly— as in, ASAP.
Buying a house is a big decision, but it can feel especially overwhelming to place an offer on a home less than 24 hours after seeing it for the first time. Plus you’re under pressure to outbid several other buyers — or risk losing the house.
“It’s important to understand that the strength of financing is a key consideration a seller takes into account when selecting an offer,” said real estate developer Bill Samuel.

Minimize Your Contingencies (Within Reason)

Work with your real estate agent to determine how many other offers the seller already has (or expects to get) and then be prepared to draft something up that day. In our case, we toured our home for the very first time at 11 a.m. on a Monday — it came on the market the evening before — and made an offer by 4 p.m. that same day.
Work with your real estate agent to find out what matters most to the seller — is it money, closing quickly, something else entirely? Then make sure your offer addresses their needs.
“Having a realtor who can get your offer submitted quickly is crucial,” said Erik Wright, owner of New Horizon Home Buyers. “You want to get your offer in front of the seller first, and make it strong. Purchase price is the obvious factor and in a competitive market, houses often go for over asking price. However, a strong offer has several factors and it depends on what’s most important to the seller.”
Wait. Why would anyone make an offer that’s above asking price? Because the competition did it first, and in a hot seller’s market, offering above asking price is often what it takes to even be considered.
In a hot seller’s market, you’ve got to be ready to move fast. Often this is more of a change in mindset than anything else. When my partner and I first started looking at homes, we considered ourselves casual buyers — that is, until our dream home came on the market late one Sunday night. From there, things moved quickly. We saw the home, made an offer, were under contract by morning, and spent the next month and a half going through the process of closing on the house.
Besides all the usual suspects, like saving up for a down payment and improving your credit score, you’ll also want to get a pre-approval letter from your bank. It states that a bank would approve you for a mortgage of a certain amount, and acts as a guarantee to the seller that you can actually afford to buy their house.

Make a Generous Earnest Money Deposit

This is where it helps to know your budget up front.
When deciding how much of an earnest money deposit to include in your offer, keep in mind that whatever amount you give comes off the price of the home (and is returned to you if the deal falls through). In other words, there’s no reason to be cheap. If you can, go slightly above the seller’s requested deposit amount. Even if it’s just a little more than what they’re asking, that gesture of good faith might just be what gets you the house.

A row of houses on a cul de sac in a suburban neighborhood.
Getty Images

Offer Above Asking Price

Since you’ll likely be visiting the home at least once before making an offer, be prepared to talk to any neighbors you might run into. In close-knit neighborhoods, or ones where people share resources (like an HOA), sellers might care a bit more about the type of person they sell the house to.
If you’re serious about finding your dream home in the next few months, the best thing you can do is know what you want from the outset, and get your ducks in a row to make a compelling offer when you find it. Maybe this means making a list of your must-haves in a house, and working to improve your credit score. It might also mean reaching out to a real estate agent before you need one, and getting that pre-approval letter in place.
No seller wants to risk accepting an offer that might fall through. Aand since pre-approval letters can take some time to get, have one ready before you find your dream house.

Lace Up Your Running Shoes

Upping your offer may not break the bank as much as you’re fearing. “With interest rates so low these days, offering more than what the seller is asking may not make a drastic difference in your overall monthly payments,” real estate agent Pavel Khaykin of Pavel Buys Houses said.
All that said, there are certain contingencies you should never forgo, and a home inspection is one of them. Getting your home inspected is hugely important, since inspectors will often find things even the sellers weren’t aware of. No matter how much you love a house, don’t be afraid of exercising your right to an inspection.
Although inventory is low, new houses come on the market all the time.
If you happen to meet a neighbor when visiting the home, introduce yourself and make a good impression. You never know how much their opinion of you might factor into any final decisions.
While these circumstances might sound extraordinary, they’re not. With housing inventory nationwide at an all time-low — down 22% from last year according to the National Association of Realtors — it’s no wonder buyers are competing for the same few houses.

6 First Time Home Buying Myths Debunked

Buying your first home is often a dream for many renters out there. But with all the information about how to buy a home, it can be easy to believe some of the home buying myths. Whether you’re looking to buy a house in Seattle, WA, or a condo in Miami, FL, you’ve probably heard some of the myths surrounding how much you’ll need for a down payment or how high your credit score should be. 

Before you set your sights on your dream home, make sure you know just what separates the home buying myths from the facts. You may realize that you’re able to buy your first home sooner than you think.

home-buying-myths

home-buying-myths

MYTH 1: You need a 20% down payment

The biggest home buying myth for any first time homebuyer is that you need a 20% down payment to buy a home. In many cases, your down payment can be as low as 3.5%. Common types of loans with low to no down payments include FHA, VA, and USDA loans. With FHA loans – loans designed for individuals with a low-to-moderate income level and credit score- your down payment could be as low as 3.5%. For veterans and current service members, VA loans offer no down payment mortgages, and those looking to buy a home in a rural area may qualify for a no down payment USDA loan. 

Aside from loans, down payment assistance programs can help you lower the cost of your down payment. These programs are available nationwide, statewide, or locally in your county or even city. Down payment assistance programs provide a wide range of assistance types such as second mortgages, forgivable loans, or grants covering partial to full costs of your down payment. Your real estate agent or mortgage lender can help you determine what down payment assistance you qualify for. 

If you do have the means to purchase a home with a 20% down payment, there are benefits to consider. For starters, you won’t need to factor in private mortgage insurance (PMI) to your budget. PMI is an additional cost your mortgage lender may require if your down payment is below 20% and the cost is factored into your monthly mortgage payment. However, it’s always a good idea to talk with your financial advisor or wealth manager to determine your finances and whether a 20% down payment is the right option.

MYTH 2: Renting is cheaper than buying a home

One of the most common home buying myths is that renting is cheaper than buying a home. If you’re deciding whether to make the transition from renter to buyer, you might believe that renting is the less expensive option. However, in some cities the cost of renting a home may be less than or equal to a monthly mortgage payment.

If you’re serious about buying a home, you may end up saving money in the long run if you buy a house rather than continue renting. To compare the costs of renting versus buying a home, you can use a rent vs buy calculator to determine which option works best for your circumstances.

MYTH 3: Your credit score needs to be perfect

Home buying myths centered around credit scores often run rampant, specifically the myth that you must have a great credit score to buy a home. Luckily, that’s not always the case. If your credit score is at least 580, you may qualify for a 3.5% down payment FHA loan. For those looking at USDA loans, your credit score should also be a minimum of 580. VA loans actually have no minimum credit score, but instead require lenders to look at the whole loan profile of a homebuyer.

Generally speaking, if your credit score is higher you’ll likely have more options when it comes to qualifying for a conventional loan. With a higher credit score, you may also find that the terms of your loan or interest rates are better. However, just because your credit score isn’t great doesn’t mean your homeownership dreams need to come to a halt.

MYTH 4: All mortgage lenders offer the same rate

First time home buyers may have the belief that every mortgage lender will offer you the same rate no matter where you go. When shopping for a mortgage, it’s always a good idea to get more than one quote. Not every mortgage lender will offer you the same – or even the best- loan terms. To avoid making this mistake, it’s important to get quotes from several mortgage lenders and find the one that’s best suited for your finances and homeownership goals. 

MYTH 5: Home inspections are optional

Especially if there are bidding wars, it can be tempting to skip a home inspection to make your offer stand out. However, home buying myths like these may cause more issues down the road. More often than not, mortgage lenders will require a home inspection before you buy the home, so you may not even have the chance to consider passing on a home inspection.

In the case that your lender does not require an inspection, this doesn’t mean you should skip it. It’s important to know the condition of the home you’re looking to buy. That way you’ll be aware of any damage or issues the house may have before becoming the owner. If a home inspection does find any significant damage, you may be able to negotiate with the seller to repair the issues or lower your asking price. 

MYTH 6: The listing price is non-negotiable

A home buying myth that some first time homebuyers believe is that the listing price is set in stone. Depending on the housing market, you may need to be prepared to spend more than the home’s list price or negotiate for a lower price. If you’re buying in a seller’s market– where there are more buyers than homes available- you should be prepared to make an offer that’s higher than the listing price.

If it’s a buyer’s market- where there are more homes available than buyers looking to purchase- you may be able to negotiate for a lower price than what’s listed. Either way, believing the home buying myths about listing prices may cause you to lose out or even overspend on the home of your dreams.

Source: redfin.com

Home Buyers Have It Tough as Nation Faces Unprecedented Housing Shortage>

It’s no news to house hunters that the pickings are slim in today’s real estate market. While that has been true for several years, the pandemic has made the situation worse as virus-wary home sellers have pulled their properties off the market, resulting in sky-high prices and out-of-control bidding wars for the remaining stock.

Overall housing inventory plummeted 43% in January compared with the same month last year, according to a recent realtor.com® report. New listings were down 23% year over year.

Median home prices soared 15.4% annually, to $346,000 in January, as a result of the shortage. That means buyers should gear up for battle—it’s going to be a very competitive spring home-buying season.

“It’s tough for buyers, particularly first-time buyers dealing with limited options and fast-rising prices,” says realtor.com® Chief Economist Danielle Hale. “We’re looking at an all-time low number of homes for sale and record numbers of buyers trying to get into the market.”

There were 443,000 fewer homes up for grabs this year than last year, before COVID-19 hit the nation. And while builders have ramped up their pace of putting up new homes, that doesn’t seem to have made much of a dent yet. The hope is that once more people get vaccinated against the coronavirus, sellers will feel more comfortable listing their homes.

The threat of catching the virus from a potential buyer walking through and having to move in a pandemic has led many sellers to hold off.

Home prices rose the most in the Northeast, by 16.8%, followed by the West, at 12.3%, the Midwest, at 10.4%, and the South, at 8%.

In the nation’s 50 largest metropolitan areas, prices shot up the most in Austin, TX, by 30.2%. It was followed by Rochester, NY, by 25.9%, and Los Angeles, by 22.4%, in January.

“We’ve seen a lot of companies announce relocations to Austin,” says Hale. “It’s also benefiting from additional flexibility and remote work. It has a unique culture and this really vibrant tech scene making it an attractive place to live, and it’s got a really strong local economy.”

The only places to see big surges of inventory were in the two priciest metropolitan areas in the nation: Silicon Valley’s San Jose, CA, and San Francisco. The San Francisco Bay Area markets saw 24.8% and 14.4% annual increases in the number of homes for sale in January, respectively. That’s likely because many white-collar workers who can now telecommute from anywhere with a good internet connection have sought out cheaper parts of the country.

“Homes still sell very quickly, and it still is a very desirable market,” says Hale. “It’s an expensive area, and people have the flexibility to work remotely now and may be choosing to move away.”

Source: realtor.com

First-Time Home Buyers Find a Tough Market—Here’s What’s Different This Year

Starry-eyed first-time home buyers are getting a rude awakening to the realities of today’s high-stakes home-buying market.

The coronavirus pandemic supercharged the housing market, as buyers urgently seeking more space flooded the market, lured by low mortgage rates. That’s on top of the usual dynamics of household expansion: Many millennials hit 30 and wanted homes that could accommodate a growing family. Amid a historic shortage of properties for sale, the result has been bidding wars and record-high prices. It’s enough to make a first-time buyer’s head spin.

Just under half of first-time buyers and more than a third of prospective buyers were either outbid on their dream home or discovered they couldn’t afford it, according to a recent realtor.com® survey. Roughly a fifth of these buyers made five or more offers on different properties before having one accepted.

Realtor.com surveyed 1,000 recent and first-time home buyers Jan. 7–11.

“The market has been extremely competitive,” realtor.com Senior Economist George Ratiu. “There is a critical shortage of homes for sale, which has caused multiple bids to become the norm across the country.

“For first-time buyers, especially, this environment means having your financing and budgeting together is paramount,” he adds.

But it’s not all bad news. About 47% of first-time buyers were thrilled to find their budgets were larger than they had thought, according to the survey. That’s largely due to mortgage rates, which averaged just 2.73% for a 30-year fixed-rate loan in the week ending Jan. 28, according to Freddie Mac. However, 21% learned their money wouldn’t stretch as far as they had hoped.

Even those in a better financial position still had to compromise on what they wanted in a home—and where it’s located. About a fifth were forced to look in cheaper neighborhoods. Another fifth had to spend more than they had originally planned, and nearly the same number had to forgo some of the home features on their wish lists. These included things like a garage, a big backyard, a finished basement, and a pool.

To save up for a down payment, many also had to make sacrifices. Half of recent first-time homeowners saved up in less than three years by setting aside a portion of their paycheck each month, cutting out discretionary spending on the fun stuff, and depositing windfalls like tax refunds and bonuses in the bank.

Just over half, 52%, also turned to their family and friends for help.

“First-time buyers tend to be younger. This generation has higher student debt than any prior generation,” says Ratiu. “Not surprisingly, family help with providing down payment assistance plays a big role in today’s market.”

Source: realtor.com