Spring buying season is upon us; an exciting time for homebuyers who are ready to make the real estate plunge. Mortgage rates have remained steady and low (about 4%) according to the lastest Weekly Mortgage Watch, providing more buying power for today's house hunters. However, there are a few key things buyers need to be prepared for in order to make the most of this exciting real estate season.
Underestimating the competition
Demand is up and inventory remains below average. In real estate, demand is generally judged by months of available inventory based on closed sales. A normal or neutral market has 3-6 months of inventory. Determining a buyer's vs. seller's market therefore is whether that inventory is above or below the norm.
According to the latest Trendgraphix report for Southern California (OC, LA, Riverside and San Bernardino Counties), we are in a seller’s market with just over 2 months of inventory available.
That mean's you're going to face competition and it could get fierce. Be ready to make a decision, and do your research before you go out house hunting. You've got to be ready to make an offer as soon as you spot the right home for you.
Making other major purchases
It’s important to keep your priorities straight when it comes to your finances. If you’re saving up for a home, don’t make any other major purchases any time soon. Most notably, a new car.
Anytime you open a new credit account – think credit card, auto loan, etc. – your FICO score could drop. That’s why you shouldn’t be opening any new accounts before you apply for a mortgage loan, and definitely not during the application process. A big purchase will throw off your debt-to-income ratio, dropping your score. And lenders continue to check credit scores in the weeks before closing.
With high demand and low inventory, it’s a classic seller’s market. Which means low-balling a seller won’t get you anywhere. They will likely have other, better offers coming in and your low-ball will get tossed out quick. Work with your agent to come up with a reasonable offer based on the sales of comparable properties in the area.
Skipping the pre-approval
In order to properly prepare for the spring and summer buying season, you need to know exactly how much you can afford. Not an online estimate, but a fully vetted, pre-approval mortgage loan amount you can expect based on your financial situation. That's why you need a pre-approval in hand when you're out house hunting.
A pre-approval letter is not an offer to lend, a commitment to make a loan, or a guarantee of specific rates or terms. It is however an accurate idea of how much home you can afford. And most importantly as a homebuyer, it’s proof to sellers that you have done your homework and are serious about purchasing.
Work with an experienced First Team Real Estate agent this spring to ensure you make the most of your time. If you're ready to become a homeowner or move up to a bigger home to fit your needs, then it's time to do something about it.