Is a Fixer Upper Right for You?

Looking to buy a home but feeling like almost everything is out of reach? Here’s the thing. There’s still a way to become a homeowner, even when affordability seems like a huge roadblock – and it might be with a fixer upper. Let’s dive into why buying a fixer upper could be your ticket to homeownership and how you can make it work.

What Is a Fixer Upper?

A fixer upper is a home that’s in livable condition but needs some work. The amount of work varies by home – some may need cosmetic updates like wallpaper removal and new flooring, while others might require more extensive repairs like replacing a roof or updating plumbing.

Because they need some elbow grease, these homes typically have a lower price point, based on local market value. In fact, a survey from StorageCafe explains that fixer uppers generally cost about 29% less than move-in-ready homes.

And that’s why, according to a recent survey, more buyers are considering homes that need a little extra work right now (see below):

If you’re looking for an option to get your foot in the door, and you’re willing to roll up your sleeves and do a bit of work, a house with untapped potential may be a good option.

Tips for Buying a Home That Needs Some Work

Before you buy a home that may need a makeover, here are a few things to keep in mind:

• Choose a Good Location: You can repair a house, but you can’t change where it is. Make sure the home is in a neighborhood you like or one with increasing property values and a growing number of local amenities. This way, even after you spend money fixing it up, the house will be worth more later.
• Budget for Surprises: Fixing up a house can take more time and money than you might think. Make sure you save room in your budget for unexpected repairs or other unknowns that might come up while you’re working on the house.
• Get a Home Inspection: Before you buy, hire an inspector to check out the house. They’ll help you determine the necessary repairs, so you don’t end up with expensive surprises later.
• Plan Your Priorities: When deciding what to tackle first, it helps to categorize your goals. Think of your home in three ways: the must-haves (essential repairs), the nice-to-haves (upgrades that would make life easier), and the dream-state features (luxuries you can add later). This will help you prioritize and stick to your budget.

Remember, the perfect home is the one you perfect after buying it. By starting with a fixer upper, you have the opportunity to customize a home to your liking while saving money on the initial purchase price. With careful planning, budgeting, and a little bit of vision, you can turn a house that needs some love into your perfect home.

Real estate agents are great at finding homes with potential. They know the local market and can guide you to homes where smart upgrades can add value. With their help, you’re more likely to find a house that fits your total budget and has room for worthwhile improvements.

Bottom Line

In today’s market, where the cost of homeownership can be intimidating, finding a move-in-ready home that fits your budget can feel like a real challenge. But if you’re open to putting in a little work, you can transform a fixer upper into your ideal home over time. Let’s explore what’s possible and find a place that’ll work for you.

Avoid These Top Homebuyer Mistakes in Today’s Market

No one likes making mistakes, especially when they happen in what’s likely the biggest transaction of your life – buying a home.

That’s why partnering with a trusted agent is so important. Here’s a sneak peek at the most common missteps buyers are making in today’s market and how a great agent will help you steer clear of each one.

Trying To Time the Market

Many buyers are trying to time the market by waiting for home prices or mortgage rates to drop. This can be a really risky strategy because there’s so much at play that can have an impact on those things. As Elijah de la Campa, Senior Economist at Redfin, says:

“My advice for buyers is don’t try to time the market. There are ​a lot of swing factors, like the upcoming jobs report and the presidential election, that could cause the housing market to take unexpected twists and turns. If you find a house you love and can afford to buy it, now’s not a bad time.”

Buying More House Than You Can Afford

If you’re tempted to stretch your budget a bit further than you should, you’re not alone. A number of buyers are making this mistake right now.

But the truth is, it’s actually really important to avoid overextending your budget, especially when other housing expenses like home insurance and taxes are on the rise. You want to talk to the pros to make sure you understand what’ll really work for you. Bankrate offers this advice:

“Focus on what monthly payment you can afford rather than fixating on the maximum loan amount you qualify for. Just because you can qualify for a $300,000 loan doesn’t mean you can comfortably handle the monthly payments that come with it along with your other financial obligations.”

Missing Out on Assistance Programs That Can Help

Saving up for the upfront costs of homeownership takes some careful planning. You’ve got to think about your closing costs, down payment, and more. And if you don’t work with a team of experienced professionals, you could miss out on programs out there that can make a big difference for you. This is happening more than you realize.

According to Realtor.com, almost 80% of first-time buyers qualify for down payment assistance – but only 13% actually take advantage of those programs. So, talk to a lender about your options. Whether you’re buying your first house or your fifth, there may be a program that can help.

Not Leaning on the Expertise of a Pro

This last one may be the most important of all. The very best way to avoid making a mistake that’s going to cost you is to lean on a pro. With the right team of experts, you can easily dodge these missteps.

Bottom Line

The good news is you don’t have to deal with any of these headaches. Let’s connect so you have a pro on your side who can help you avoid these costly mistakes.

Why an Agent Is Essential When Buying a Newly Built Home

For some buyers, there’s a misconception that newly built homes aren’t made to last or fall short of the quality you can find in older homes. Unfortunately, this is turning some buyers away from what may be one of their best options in today’s housing market. As Builder Online says:

“As resale inventory remains limited and the price spread between new and resale homes narrows, new homes are increasingly an attractive value proposition for buyers, with incentives such as rate buydowns a way to help address ongoing affordability challenges.”

So, is there any merit to the myth? Let’s break down the best way to make sure you feel good about looking into new home construction. That way, you’re not missing out on such a great option today.

Choosing the Right Builder

The key to making sure you get a quality newly built home is to choose a good builder. Reputable builders adhere to strict building codes and standards, use advanced construction techniques, and often offer warranties that cover structural issues for several years. That’s why the Mortgage Reports offers this advice:

“When embarking on the journey of buying a new construction home, one of the most important steps is selecting the right builder. This decision can significantly impact the quality and satisfaction you derive from your new home.”

And while you could dig into research about all the builders in your area, there’s an easier option to get the job done: lean on a pro. When you work with a local real estate agent, they already know about the builders and the new home communities under construction in your area.

Beyond that, maybe they’ve even worked with other buyers who opted for a home in one of those neighborhoods. Here are just a few of the things your agent will help you with:

1. The Builder’s Reputation: Your agent will help point you toward builders with strong reputations and positive reviews from previous buyers. Additionally, your agent will make sure the builder is licensed and insured. Membership in professional organizations, such as the National Association of Home Builders (NAHB), is also a good sign of a builder’s commitment to industry standards.

2. Their Model Homes: Your agent will also be able to tell you if the builders have model homes you can tour. And when your agent walks through the model with you, they’ll draw your attention to the little details that matter most. Things like the quality of finishes, layout, and overall feel of the home.

3. Builder Warranties: Your agent will also be able to help you navigate any builder offers or incentives. Reputable builders often provide warranties to cover major structural elements of the home for a significant period of time. This is a testament to their confidence in the quality of their construction.

4. Getting Inspections: Even with new homes, inspections are crucial. Your agent will coordinate the inspections with licensed professionals to ensure the home meets safety and quality standards before you move in.

Agents Are the MVP When You’re Buying a Brand-New Home

Maybe that’s why data shows homebuyers unanimously scored their agents higher than their builders when looking back on their recent purchase:

So, you don’t need to worry that they just don’t make them like they used to. By working with a knowledgeable real estate agent to choose a reputable builder, you can feel confident when buying a newly built home today. As Realtor.com says:

“If you are interested in buying a new construction . . . You need your own real estate agent from the get-go. Even if it seems like plug and play to sign up with the builder’s on-site agent, you’re going to want someone representing your side of the deal.”

Bottom Line

If you’re considering buying a brand-new home, don’t let misconceptions hold you back. Let’s work together to find a home you’ll love and be proud to call your own.

Why a Condo Could Be Your Perfect First Home

If you’re looking to break into homeownership but the price of single-family homes has you second-guessing, you might want to consider a condominium (condo) or townhome. These types of homes often come with a lower barrier to entry – and that can help you start to build equity and enjoy the benefits of owning a home sooner.

Since they’re usually smaller than single-family homes, they can be easier on your wallet. While it’s not always the case, smaller square footage usually comes with a smaller price tag too. As a result, according to the latest data from Realtor.com, condos typically have a lower asking price than single-family homes (see graph below):

And here’s some exciting news: builders are focusing more on homes like these. The National Association of Home Builders (NAHB) says:

“The share of townhomes being built is at an all-time high.”

That means there’s a good number of options to add to your home search if you broaden it to include condos and townhomes. And you may even find something that works better for your budget.

So, if you’re comfortable with a smaller space and want to buy your first home before the spring rush, adding these types of homes to your search might be your answer.

The Perks of a Condo Lifestyle

Living in a condo has a bunch of other perks, too. Let’s look closer at why condos are appealing for first-time buyers:

• They help you start building equity. When you buy a condo or townhome, you build equity and your net worth as you make your mortgage payments and as your condo’s value goes up over time.
• They can be low maintenance. Condos are great if you want to own your place but don’t want to mow the lawn, shovel snow, or fix the roof. Your real estate agent can help explain any associated fees and details for the condos you’re interested in.
• They usually come with a range of amenities. Your condo might come with access to a pool, dog park, or parking. And the best part? You don’t have to take care of any of them.
• They create a sense of community. Buying a condo means you’ll be living close to other people, which is nice if you want a more close-knit feel. Many communities like these hold fun events such as barbecues and parties to help create that sense of connection among residents.

Remember, your first home doesn’t have to be the one you stay in forever. The important thing is to get your foot in the door as a homeowner so you can start to gain home equity. Later on, that equity can help you buy another place if you want something different.

Ultimately, owning and living in a condo or townhome is a lifestyle choice. If you want to see if it makes sense for you, talk to a local real estate agent.

Bottom Line

Ready to find a home that suits your goals? A condo might be the perfect fit for your first home purchase. Let’s connect today to start your search.

Two Reasons Why the Housing Market Won’t Crash

You may have heard chatter recently about the economy and talk about a possible recession. It’s no surprise that kind of noise gets some people worried about a housing market crash. Maybe you’re one of them. But here’s the good news – there’s no need to panic. The housing market is not set up for a crash right now.

Real estate journalist Michele Lerner says:

“A housing market crash happens when home values plummet due to a lack of demand for homes or an oversupply.”

With that definition in mind, here are two reasons why this just isn’t on the horizon.

1. Demand for Homes Is Higher than Supply

One of the biggest reasons the housing market crashed back in 2008 was an oversupply of homes. Today, though, it’s a very different story.

It’s a general rule of thumb that a market where supply and demand are balanced has a six-month supply of homes. A higher number means supply outpaces demand, and a lower number means demand outpaces supply. The graph below uses data from NAR to put today’s situation into context:

The graph compares housing supply during three different periods of time. The red bar shows there were 13 months of supply before the 2008 crisis, which was far too much. The gray bar shows a balanced market with six months of supply, for context. And the blue bar shows there are only 4.2 months of supply today.

Put simply, there are more people who want to buy homes than there are homes available to buy right now. So, demand is greater than supply. When that happens, home prices stay steady or rise – the opposite of a housing market crash.

It’s important to note that inventory levels differ from market to market. Some areas may be more balanced, while a few could have a slight oversupply, which can impact prices locally. However, most markets continue to experience a shortage of homes.

Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“We simply don’t have enough inventory. Will some markets see a price decline? Yes. [But] with the supply not being there, the repeat of a 30 percent price decline is highly, highly unlikely.”

2. Unemployment Is Still Low

When people are unemployed, they’re more likely to have trouble making their mortgage payments and may be forced to sell or face foreclosure. That was a big problem during the 2008 financial crisis. Today, the employment situation is much more stable (see graph below):

Again, this graph shows three different periods of time, but this one is the unemployment rate. The red bar represents the 2008 financial crisis when unemployment was very high at 8.3%. The gray bar shows the 75-year average of 5.7%. And the blue bar shows the unemployment rate today, and it’s much lower at just 4.1%.

Right now, people are working, earning an income, and making their mortgage payments. That’s one reason why the wave of foreclosures that happened in 2008 isn’t going to happen again this time. Plus, since so many people are employed right now, many are actually in a position to buy a home, and this demand keeps upward pressure on prices.

Today’s Housing Market Is Stronger than in 2008

While it’s understandable to be concerned when you hear talk of a recession and economic uncertainty, but know this: the housing market is in a much better place than it was in 2008. According to Rick Sharga, Founder and CEO at CJ Patrick Company:

“Literally everything is different about today’s housing market dynamics than the conditions that led to the housing crisis.”

Demand for homes still outpaces supply, and unemployment remains low. And these are two key factors that will help prevent the housing market from crashing any time soon.

Bottom Line

The housing market is doing a lot better than it was in 2008, but it’s important to remember that real estate is very local.

So, it’s always a good idea to stay informed about our specific market. If you have any questions or want to discuss how these factors are playing out in our area, feel free to reach out.

This Is the Sweet Spot Homebuyers Have Been Waiting For

After months of sitting on the sidelines, many homebuyers who were priced out by high mortgage rates and affordability challenges finally have an opportunity to make their move. With rates trending down, today’s market is a sweet spot for buyers—and it’s one that may not last long.

So, if you’ve put your own move on the back burner, here’s why maybe you shouldn’t delay your plans any longer.

As you weigh your options and decide if you should buy now or wait, ask yourself this: What do you think everyone else is going to do?

The truth is, if mortgage rates continue to ease, as experts project, more buyers will jump back into the market. A survey from Bankrate shows over half of homeowners would be motivated to buy this year if rates drop below 6% (see graph below):

With rates already in the low 6% range, we’re not terribly far off from hitting that threshold. The bottom line is, that when they drop into the 5s, the number of buyers in the market is going to go up – and that means more competition for you.

That increased demand will likely push home prices up, which could potentially take away from some of the benefits you’d gain from a slightly lower interest rate. As Nadia Evangelou, Senior Economist and Director of Real Estate Research at the National Association of Realtors (NAR), explains:

“The downside of increased demand is that it puts upward pressure on home prices as multiple buyers compete for a limited number of homes. In markets with ongoing housing shortages, this price increase can offset some of the affordability gains from lower mortgage rates.”

So, while waiting to buy may seem like a smart move, it could backfire if rising prices outpace your savings from slightly lower rates.

What This Means for You

Right now, you’ve got the chance to get ahead of all of that. Today’s market is a buyer sweet spot. Why? Because a lot of other buyers are waiting – which means not as many people are actively looking for homes. That means less competition for you.

At the same time, affordability has already improved quite a bit. Recent easing in mortgage rates has made homeownership more accessible. As Mike Simonsen, Founder of Altos Research, says:

“Mortgage payments on the typical-price home are 7% lower than last year and are 13% lower than the peak in May 2024.”

And while the supply of homes for sale is still low, it’s also higher than it’s been in years. According to Ralph McLaughlin, Senior Economist at Realtor.com:

“The number of homes actively for sale continues to be elevated compared with last year, growing by 35.8%, a 10th straight month of growth, and now sits at the highest since May 2020.”

This means you now have more options to choose from than you’ve had in quite a while.

With fewer buyers in the market, improving affordability, and more homes to choose from, you have the chance to find the right one before the competition heats up.

Why Waiting Could Cost You

If you’re waiting for the perfect time to buy, it’s important to understand that timing the market is nearly impossible. The longer you wait, the higher the risk that market conditions will shift—and not necessarily in your favor. As Greg McBride, Chief Financial Analyst at Bankrate, says:

“It’s one of those things where you should be careful what you wish for. A further drop in mortgage rates could bring a surge of demand that makes it tougher to actually buy a house.”

Bottom Line

Don’t wait until you have to deal with more competition and higher prices – you already have the chance to buy a home while we’re in the sweet spot today. Let’s connect to make sure you’re taking advantage of it.

Why Buying Now May Be Worth It in the Long Run

Should you buy a home now or should you wait? That’s a question a lot of people have these days. And while what’s right for you is going to depend on a lot of different factors, here’s something you’ll want to consider as you make your decision.

As soon as you buy, you’ll start gaining equity. And you’d be surprised how quickly that can add up – even with more moderate home price appreciation.

Each quarter, Fannie Mae releases the Home Price Expectations Survey. It asks over one hundred economists, real estate experts, and investment and market strategists what they forecast for home prices over the next five years. In the latest release, experts project prices will continue to rise nationally through at least 2028 (see the graph below):

While home prices are going to vary from one local area to the next, this shows they’re expected to keep going up nationally. The size of the increase varies from year-to-year, but the important takeaway is that prices are forecast to rise every single year – just at a moderate pace.

And while rising home prices may not sound great right now, once you own a home, that growth will be a big bonus for you. Here’s a look at what you stand to gain equity-wise once you buy. The graph below uses a typical home’s value and those HPES projections to show how much equity is at stake:

If you bought a $450,000 home at the beginning of this year, based on that starting value and the expert forecasts from the HPES, you could gain more than $90,000 in household wealth over the next five years. That’s significant.

So, if you’re ready and able to buy, and growing your wealth is important to you, you’ve got an opportunity in front of you. And now that mortgage rates have fallen, it may be time to consider making a move.

To talk more about your options and what makes sense, lean on a pro. They’ll be able to tell you what home prices are doing in your area and what that means for your move (and your future equity). The Mortgage Reports says:

“Given the intricacies of the current market, it’s more important than ever to stay informed and up to date about housing market conditions. Whether you’re looking to buy or sell in the remaining months of 2024, having a professional guide you through the process can make all the difference.” 

Bottom Line

The decision to buy now or wait is a very personal one, but it’s valuable to have an expert’s perspective. They won’t push you, but they will explain things you may not have considered, like the equity that’s at stake.

If you want help weighing your options and thinking through how the current market factors in, let’s connect.

Falling Mortgage Rates Are Bringing Buyers Back

If you’ve been hesitant to list your house because you’re worried no one’s buying, here’s your sign it may be time to talk with an agent.

After months of high rates keeping buyers on the sidelines, things are starting to shift. Rates are already coming down due to a number of economic factors. And yesterday the Federal Reserve cut the Federal Funds Rate for the first time since they began raising that rate in March 2022. And while they don’t control mortgage rates, this sets the stage for mortgage rates to fall even further than they already have – especially since more cuts from the Fed are expected into next year. And lower mortgage rates are bringing more buyers back into the market. Lisa Sturtevant, Chief Economist at Bright MLS, says:

“A drop in the cost of borrowing will help fuel more homebuyer demand . . . Falling rates will also bring more sellers into the market.”

The best part? You can take advantage of that renewed buyer interest.

As Rates Fall, Buyer Activity Goes Up

The graph below illustrates the relationship between falling mortgage rates and rising buyer activity. The orange line represents the average 30-year fixed mortgage rate, while the blue line shows the Mortgage Bankers Association (MBA) Mortgage Application Index, which tracks the number of mortgage applications.

As you can see, as mortgage rates (orange) come down, the Mortgage Application Index (blue) rises, showing more people start to re-engage in the process (see graph below):

What This Means for You

According to the National Association of Realtors (NAR), home sales increased in July, which was a welcome shift after four straight months of declines. If you’re a homeowner thinking about selling, this uptick in buyer activity works in your favor.

More buyers means more competition, which can lead to higher offers and shorter time on the market for your house. And, according to Edward Seiler, AVP of Housing Economics at the Mortgage Bankers Association (MBA), this trend is expected to continue:

“MBA is expecting that slower home-price appreciation, coupled with lower rates, will ease affordability constraints and lead to increased activity in the housing market.”

All in all, the market is becoming more accessible to a wider range of buyers, which could result in even more people looking to purchase a house like yours.

With more buyers entering the market, now’s the time to start getting your house ready to sell.

Bottom Line

The recent decline in mortgage rates is already driving more buyers into the market, and experts project this trend will continue. Let’s work together to take advantage of this increased buyer demand and get your house ready to sell.

The Latest Builder Trend: Smaller, Less Expensive Homes

Even though affordability is improving, buying a home can still feel tough right now. But here’s some good news: builders are focusing their efforts on building smaller homes, and they’re offering key incentives to buyers. And both of these things can be a big help if you’re worried about finding a home that’s right for your budget.

Builders Are Building Smaller Homes 

During the pandemic, homebuyers were looking for larger homes—and many could afford them. Builders responded to that demand and created bigger spaces to help people with things like working from home, setting up home gyms, and having extra rooms for virtual school.

Now, with affordability as tight as it is, builders are turning their focus to smaller single-family homes. Data from the Census shows how significant this trend toward smaller new homes has been over the last couple of years (see graph below):

But why would builders want to build smaller homes right now? At the end of the day, builders are going to focus on building homes that meet current market demand – because they want to build what they know will sell. And the number one thing homebuyers are looking for right now is better affordability. Since smaller homes typically come with smaller price tags, both buyers and builders have shifted their focus to homes with less square footage. The National Association of Home Builders (NAHB) reports:

 “. . . home buyers are looking for homes around 2,070 square feet, compared to 2,260 20 years ago.” 

And according to Orphe Divounguy, Senior Economist at Zillow:

“Not only are cash-strapped buyers continually seeking out lower-cost options, but developers are changing what type and size of home they’re producing to try and meet that need.”

How a Newly Built Home Can Help You Achieve Your Homebuying Goals

So, if you’re having a hard time finding something in your budget, it may be time to look at brand-new homes that have a smaller footprint. When you do, you may get a few other fringe benefits that can help on the affordability front – like price reductions or mortgage rate buy-downs.

According to the most recent data from Zonda, more than half of builders are offering incentives, some of which are mortgage rate buydowns. And those perks could help lower your future monthly housing payment too. John Burns, CEO of John Burns Research & Consulting, shares:

“The monthly payment matters more than anything else and builders have responded with smaller, more efficient homes.”

Not to mention, with new home construction, you’ll also get brand new everything, have fewer maintenance needs, and get some of the latest features available. That’s worth looking into, right?

Bottom Line

With builders focusing on smaller homes, you may have more budget-friendly options when it matters most. If you’re thinking about buying a home soon, let’s connect and see what’s available where you want to live.

Mortgage Rates Drop to Lowest Level in over a Year and a Half

Mortgage rates have hit their lowest point in over a year and a half. And that’s big news if you’ve been sitting on the homebuying sidelines waiting for this moment.

Even a small decline in rates could help you get a better monthly payment than you would expect on your next home. And the drop that’s happened recently isn’t small. As Sam Khater, Chief Economist at Freddie Mac, says:

“Mortgage rates have fallen more than half a percent . . . and are at their lowest level since February 2023.”

But if you want to see it to really believe it, here’s how the math shakes out. Take a closer look at the impact on your monthly payment.

The chart below shows what a monthly payment (principal and interest) would look like on a $400K home loan if you purchased a house back in April (this year’s mortgage rate high), versus what it could look like if you buy a home now (see below):

Going from 7.5% just a few months ago to the low 6s has a big impact on your bottom line. In just a few months’ time, the anticipated monthly payment on a $400K loan has come down by over $370. That’s hundreds of dollars less per month.

Bottom Line

With the recent drop in mortgage rates, the purchasing power you have right now is better than it’s been in almost two years. Let’s talk about your options and how you can make the most of this moment you’ve been waiting for.

The Best Time To Buy a Home This Year

A shift is underway in the housing market this season. And if you’ve been sitting on the sidelines waiting for the right moment to jump back into your homebuying search, this is a great time to do it. That’s because the best week to buy a home this year is just around the corner. Your sweet spot is here.

The experts at Realtor.com study seasonal trends to figure out the ideal week for homebuyers:

“Nationally, the best time to buy in 2024 is the week of Sept. 29–Oct. 5. This week historically has shown the best balance of market conditions that favor buyers. Inventory tends to be high, prices are below peak levels, demand is waning, and the pace of the market slows to a more manageable speed.” 

In addition to the historical trends and typical seasonality that Realtor.com looks at, there are also clear indicators in today’s market data that you’ll see better conditions right now than you would have over the last few years.

Mortgage rates just hit their lowest point in 19 months, and that goes a long way to help with your purchasing power and affordability. Andy Walden with Intercontinental Exchange Inc. (ICE) points out:

“Recent easing in mortgage rates brought some much-sought relief to prospective homebuyers. Along with a general cooling in home price growth, rates falling below 6.5 percent made August the most affordable month for housing since February.”

And Ralph McLaughlin, Senior Economist at Realtor.com, explains that it’s not just rates that have improved – inventory has too:

“The number of homes actively for sale continues to be elevated compared with last year, growing by 35.8%, a 10th straight month of growth, and now sits at the highest since May 2020.”

That should give you more options. At the same time, sellers now have to compete with each other for your attention. That means they’ll be more likely to negotiate because they know their house will sit on the market longer if they don’t. As Zillow says:

“Buyers waiting on the sidelines could find that early fall presents a ‘sweet spot,’ where there’s less competition from other buyers, more motivated sellers and lower interest rates to finance their purchases.”

Bottom Line

If you want to make sure you’re ready to take advantage of this sweet spot, let’s connect and start the prep work now. Maybe it’s time to get off the sidelines and into the action.

Why Pre-Approval Should Be at the Top of Your Homebuying To-Do List

Since the supply of homes for sale is growing and mortgage rates are coming down, you may be thinking it’s finally your moment to jump into the market. To make sure you’re ready, you need to get pre-approved for a mortgage.

That’s when a lender looks at your finances, including things like your W-2, tax returns, credit score, and bank statements, to figure out what they’re willing to loan you. After that process, you’ll get a pre-approval letter to show what you can borrow. Here are two reasons why this is essential in today’s market.

Pre-Approval Helps You Know Your Numbers

While home affordability is finally starting to show signs of improving, it’s still tight. So, it’s a good idea to talk to a lender about your loan options and how today’s changing mortgage rates will impact your monthly payment. The pre-approval process is the perfect time for that. In addition to determining the maximum amount you can borrow, pre-approval also helps you understand this piece of the puzzle. As Investopedia says:

“Consulting with a lender and obtaining a pre-approval letter allows you to discuss loan options and budgeting with the lender; this step can clarify your total house-hunting budget and the monthly mortgage payment you can afford.”

You should use this information to tailor your home search to what you’re actually comfortable with budget-wise. Since mortgage rates have inched down some lately, you may find you’re able to afford a bit more than you’d expect for your monthly payment, but you still want to avoid overextending. As CNET explains:

“In many cases, a lender may preapprove you for more than you need to spend on a home. And while it can be tempting to look at houses outside your budget, it won’t help you in the long run. Before you start touring homes, figure out how much you can realistically afford and stick to your budget.”

Pre-Approval Makes Your Offer More Appealing

And once you do find a home you want in your budget, pre-approval has another big perk. It not only makes your offer stronger, it also shows sellers you’ve already undergone a credit and financial check. When a seller sees you as a serious buyer, they may be more attracted to your offer because it seems more likely to go through. As Greg McBride, Chief Financial Analyst at Bankrate, says:

“Preapproval carries more weight because it means lenders have actually done more than a cursory review of your credit and your finances, but have instead reviewed your pay stubs, tax returns and bank statements. A preapproval means you’ve cleared the hurdles necessary to be approved for a mortgage up to a certain dollar amount.”

As mortgage rates trend down, more buyers are going to be ready to jump back into the market. And while demand is still limited right now, there’s the potential for competition to pick back up, especially in hot markets. So, why not stack the deck in your favor and make sure you’re putting yourself in the best position possible when you find a home you love?

Bottom Line

If you’re planning on buying a home, don’t forget to get pre-approved early in the process. It can help you get a more in-depth understanding of what you can borrow and shows sellers you mean business.