Financial Fundamentals for First-Time Homebuyers
Are you prepping to buy your first home? If so, one of the steps you should take early on is making sure you’re financially ready for your purchase. Here are just a few of the financial fundamentals you’ll need to focus on as you set out to buy a home.Build Your CreditYour credit is one element that helps determine which home loan you’ll qualify for. It also impacts your mortgage interest rate. While there are many factors that go into your mortgage application, a higher credit score could lead to a lower monthly payment in the long run.So how do you make sure your credit is in the best shape possible when it’s time to buy? A recent article from NerdWallet lists a few tips you can use as you work to build and strengthen your credit. They include:Tracking your credit and disputing any errors that show up on your reports.Paying your bills on time. This includes making loan payments and paying down any open lines of credit.Keeping your credit card balances low. Paying more than your minimum monthly balance when you’re able can help.Automate Your Savings for Your House FundYou might also be wondering how you can achieve your down payment savings goals. Bankrate provides buyers with a number of tips to help you save, including searching for down payment assistance programs and ways you can save more, faster. As the article says:“One of the best ways to save for anything — including a down payment — is to set it and forget it. If you receive a regular paycheck, ask your employer to direct a portion of that payment into a savings account. If you’re a freelance worker or independent contractor, set up a recurring transfer from a checking account to a savings account to establish the routine.”Get Pre-ApprovedAs you prepare for your purchase, you’ll also need to have a good grasp on your budget and how much you’ll be able to borrow for your home loan. That’s where the pre-approval process comes in.Pre-approval from a lender lets you know how much money you can borrow for your home loan. And having that knowledge, plus an understanding of your savings, can help you decide on your target price range for a house.From there, you can start browsing for houses online and see what’s available in your area in that general price point. This can help you really understand your options so you can start to picture your future home.For Customized Advice, Build a Team of ProfessionalsFinally, the best way to make you’re prepared for your purchase is to connect with trusted real estate professionals. Having expert advisors in the industry will help you make strong decisions throughout the homebuying process based on your specific goals, finances, and situation. They know the market and can guide you toward the home of your dreams.Bottom LineIf you’re ready to get the homebuying process started, let’s connect so you can begin to build your team of professionals today.
What To Expect From the Housing Market in 2023
The 2022 housing market has been defined by two key things: inflation and rapidly rising mortgage rates. And in many ways, it’s put the market into a reset position.As the Federal Reserve (the Fed) made moves this year to try to lower inflation, mortgage rates more than doubled – something that’s never happened before in a calendar year. This had a cascading impact on buyer activity, the balance between supply and demand, and ultimately home prices. And as all those things changed, some buyers and sellers put their plans on hold and decided to wait until the market felt a bit more predictable.But what does that mean for next year? What everyone really wants is more stability in the market in 2023. For that to happen we’ll need to see the Fed bring inflation down even more and keep it there. Here’s what housing market experts say we can expect next year.What’s Ahead for Mortgage Rates in 2023?Moving forward, experts agree it’s still going to be all about inflation. If inflation is high, mortgage rates will be as well. But if inflation continues to fall, mortgage rates will likely respond. While there may be early signs inflation is easing as we round out this year, we’re not out of the woods just yet. Inflation is still something to watch in 2023.Right now, experts are factoring all of this into their mortgage rate forecasts for next year. And if we average those forecasts together, experts say we can expect rates to stabilize a bit more in 2023. Whether that’s between 5.5% and 6.5%, it’s hard for experts to say exactly where they’ll land. But based on the average of their projections, a more predictable rate is likely ahead (see chart below):That means, we’ll start the year out about where we are right now. But we could see rates tick down if inflation continues to drop. As Greg McBride, Chief Financial Analyst at Bankrate, explains:“. . . mortgage rates could pull back meaningfully next year if inflation pressures ease.”In the meantime, expect some volatility as rates will likely fluctuate in the weeks ahead. If we see inflation come back under control, that would be good news for the housing market.What Will Happen to Home Prices Next Year?Homes prices will always be defined by supply and demand. The more buyers and fewer homes there are on the market, the more home prices will rise. And that’s exactly what we saw during the pandemic.But this year, things changed. We’ve seen home prices moderate and housing supply grow as buyer demand pulled back due to higher mortgage rates. The level of moderation has varied by local area – with the biggest changes happening in overheated markets. But do experts think that will continue?The graph below shows the latest home price forecasts for 2023. As the different colored bars indicate, some experts are saying home prices will appreciate next year, and others are saying home prices will come down. But again, if we take the average of all the forecasts (shown in green), we can get a feel for what 2023 may hold.The truth is probably somewhere in the middle. That means nationally, we’ll likely see relatively flat or neutral appreciation in 2023. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:“After a big boom over the past two years, there will essentially be no change nationally . . . Half of the country may experience small price gains, while the other half may see slight price declines.”Bottom LineThe 2023 housing market is going to be defined by mortgage rates, and rates will be determined by what happens with inflation. The best way to keep a pulse on what experts are projecting for next year is to lean on a trusted real estate advisor. Let’s connect.
Mortgage Rates Are Dropping. What Does That Mean for You?
Mortgage rates have been a hot topic in the housing market over the past 12 months. Compared to the beginning of 2022, rates have risen dramatically. Now they’re dropping, and that has to do with everything happening in the economy.Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), explains it well by saying:“Mortgage rates dropped even further this week as two main factors affecting today’s mortgage market became more favorable. Inflation continued to ease while the Federal Reserve switched to a smaller interest rate hike. As a result, according to Freddie Mac, the 30-year fixed mortgage rate fell to 6.31% from 6.33% the previous week.”So, what does that mean for your homeownership plans? As mortgage rates fluctuate, they impact your purchasing power by influencing the cost of buying a home. Even a small dip can help boost your purchasing power. Here’s how it works.The median-priced home according to the National Association of Realtors (NAR) is $379,100. So, let’s assume you want to buy a $400,000 home. If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates move up or down (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range.This goes to show, even a small quarter-point change in mortgage rates can impact your monthly mortgage payment. That’s why it’s important to work with a trusted real estate professional who follows what the experts are projecting for mortgage rates for the days, months, and year ahead.Bottom LineMortgage rates are likely to fluctuate depending on what happens with inflation moving forward, but they have dropped slightly in recent weeks. If a 7% rate was too high for you, it may be time to contact a lender to see if the current rate is more in line with your goal for a monthly housing expense.
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