With a hot housing market, you may find yourself in a bidding war for a new home. There are ways to arm yourself to help you win.
Long gone are the days you could practically name your own price for the house you wanted to buy.
Prices around the nation are soaring, and houses are being snapped up by buyers, often in just a matter of days.
As of July, nearly half of all homes on the market around the country sold in less than a month, and prices have climbed more than 13 percent in the past year, according to the National Association of Realtors.
With houses in such demand, you could easily find yourself in a bidding war for the right house in the right location.
By following certain steps, you’ll improve the chances of scoring the house of your dreams.
Do your legwork
Before you talk to lenders about mortgages, spend some time online and get a basic idea of how much home you can afford and how much your monthly mortgage payments might be. Sites such as Zillow.com have a variety of calculators that can help you make those determinations. Also get copies of your credit reports from AnnualCreditReport.com to make sure you don’t have any black marks against you that will preclude you from getting a loan. Each year, you’re entitled to a free credit report from each of the three main credit reporting agencies – Experian, Equifax and TransUnion – though you’ll have to pay to get your credit scores.
Once you know how much you can afford to spend, you should get mortgage preapproval from a lender. The preapproval means that based on your income and credit report, you can afford a certain mortgage amount. Having the preapproval tells real estate agents you’re serious about buying a home, and it also lets you know how much you can afford, so you won’t waste your time looking at houses outside your price range.
Lock in your mortgage rate
While mortgage rates remain extremely low, in recent months they’ve started to climb. When you find a good rate, be sure you lock it in with your lender. With a lock in place, the rate you’ll pay for your mortgage is guaranteed, even if rates in general continue to rise. A lock is for a set period, such as 30 or 60 days, but could be for shorter or longer lengths of time.
Time is often of the essence when you want to buy a home. If you find a great house at a great price, there’s a good chance other buyers will have their eyes on it as well. This isn’t the time to mull it over for a couple of weeks. Instead, make your offer as soon as possible. As long as it’s included in the contract, you’ll still have a chance to have the home inspected, and you’ll be able to walk away if things aren’t as they seem on the surface. (Not having a home inspection is one of the dumb moves a homebuyer can make.)
Pay what you can
It’s not uncommon to put up $500 or $1,000 as earnest money when you want to buy a home. But if you can afford to put down $5,000 or $10,000, do it. This shows the sellers you’re serious about purchasing their home. If they’re considering several offers, your offer just might land you at the top of their list. Just make sure you’re certain of the terms covering its return.
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