How To Buy a Home in a Low-Inventory Market
With an increased interest to buy, but a low market of available houses to purchase, it can be easy to overpay and under budget for a home in a low inventory environment. Begin the journey of homeownership with these steps in mind to make your house-hunting process a little easier.
Know Your Budget
When you get inspired by the idea of owning a home, your first instinct might be to start searching through property listings. Before you get too far ahead and accidentally over or underprice yourself, take time to review your budget and see how much home you can afford.
Add up your monthly income. According to Dave Ramsey, you can estimate your maximum mortgage payment by multiplying your monthly take-home pay by 25%. (Example: If you bring home $5,000 a month, your house payment should not exceed $1,250 a month.)
Consider any potential taxes, fees, dues, and insurance when thinking about your monthly mortgage payment. This is also a good time to think about a down payment, loan terms, and the interest rate.
Use our free How Much Home Can I Afford Calculator to get started.
Are You Ready to Be a Homeowner?
Talk About Loan Commitment
There are many types of home loans to fit your needs. Check out the type of home loan to fit your budget:
Fixed Rate Mortgages: A more “traditional” loan that keeps the original interest rate throughout the entire life of the loan.
Adjustable Rate Mortgages: Typically includes an initial, lower fixed rate for the first years of the loan and can increase after the first 5, 7, or 10 years of the loan.
See the Difference Between Jumbo and Conventional Home Loans.
Create a Want Vs. Need List
Make a list of wants versus needs in a home based on the market you’re house-hunting in. Location logistics might narrow down your search: Is the school district important? Do you want easy access to city life or prefer to be in a quieter neighborhood? Consider the compromise on the aesthetics of the home or items you know may be upgraded in the future, such as preferred flooring or newer appliances.
Work with a Real Estate Agent and a Mortgage Loan Officer
Buying a home can be an exciting, exhausting process especially in a low-inventory market. A mortgage loan officer can help you through the preapproval process and the rest of the financial side of purchasing a home, while a real estate agent can focus on finding the perfect home.
The Role of a Mortgage Loan Officer
Mortgage loan officers will walk you through your entire home loan journey—including the preapproval process and helping you choose the ideal mortgage. Because mortgage loan officers are licensed and have regular training, you can trust them to act with your best interest in mind.
Speak to a mortgage loan officer today to learn more about the home loan process.
The Role of a Real Estate Agent
A real estate agent, or realtor, is most experienced with the process of buying and selling a home. Your realtor helps you negotiate pricing, bidding, and work through contingencies beforehand. Because real estate agents are local, they have good knowledge of the surrounding neighborhoods and can give you an advantage when searching for a home in a low inventory market.
How Do You CU? What are some tips you’ve learned during the house-hunting experiences? Have you purchased or sold a home in a low inventory market? We’d love to hear from you! Share you story in the comment section or through our contact form.