It’s 2018 and the real estate market is shaking things up much earlier than expected. Interest rates are rising higher and faster than predicted, and home prices are also on the rise. This combo may not be the best news if you’re planning on buying a new home this year, but is there anything that you can do to help better your situation?
The answer is a definite “yes.” The one thing that buyers can expect from the housing market for the foreseeable future is that they will be paying more for less. This means careful considerations need to be made before making a buying decision. Here are four things you need to keep in mind when buying a home during a period of rising rates and home prices.
Know Your Financial Limitations
In every market, you simply must know how much home you can realistically afford before you buy. Lenders use a series of complex processes to determine how much money you can afford to borrow, but that number isn’t always how much you can afford to borrow.
Before shopping for homes, you need to get familiar with your finances and create a budget so you’re shopping within your range. Knowing how much you can spend is also important because with interest rates on the rise, getting pre-approved (not pre-qualified!) for a mortgage is more important than ever.
Discover the True Cost of Owning the Home
If you do the math and determine that you can afford a $350,000 home, but only if you make a few sacrifices, then you’re setting yourself up for failure. Before buying, you need to know the true cost of owning the home.
For instance, you need to find out how much the home costs to cool and heat because utilities are often much higher than you might expect. You also need to consider things like routine maintenance and major repairs. How long will the roof or HVAC system last before you’ll need to replace them?
You should make sure you have enough of a financial buffer that will allow you to manage these things, so they don’t put a strain on your finances.
Learn How to Negotiate
Unless you put a lot more money down on your home, there is little you can do about your interest rate. But, there is something you can do about the selling price on the home. By learning how to negotiate, you might be able to whittle the price down a little bit.
Pay close attention to the home inspection, as this may provide you with fuel to get the price lower, or at the very least, to have the current homeowner pay for the repairs before closing so you don’t have to. This is also where choosing the right agent is a very important decision and not one to be taken lightly.
Think About Selling the Home Before You Buy It
Before you buy your home, take a moment and think about the future, and how hard the home would be to sell if you were planning to move. Most people don’t want to think about moving as they’re buying a new home, but it is important.
Think about the home’s pros and cons and what you’re willing to overlook to purchase it. If the home has a problem that you are willing to overlook, it doesn’t mean that future buyers will. For instance, it may not matter to you if the home is located next to a railroad track, but when it comes time for you to sell, the home’s location may make it much more difficult to offload.