Buying a house – in a year? Here’s your financial checklist – Orange County Register

“Tanking” perfectly describes the first few months of the 2023 home buying season.

Homebuyer confidence is the lowest I’ve seen in my 35-year career as a mortgage originator. The current market makes the Great Recession selling days seem like a rush. Few want to buy now. Only the most motivated pull the trigger.

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According to the Mortgage Bankers Association, the purchase index fell 43% on Feb. 15 from a year ago.

“Purchase applications fell to their lowest level since the beginning of this year and were more than 40 percent lower than a year ago,” said Joel Kan, the MBA’s deputy chief economist. “Prospective buyers remain very sensitive to current levels of mortgage rates, which are more than 2 percentage points higher than last year’s levels and have significantly reduced buyers’ purchasing power.”

CONTINUE READING: Home prices fell in 90% of US markets in the 2nd half

Mortgage affordability is just the tip of the inflation iceberg. The consumer price index rose 0.5% in January after rising just 0.1% in December, the Bureau of Labor Statistics reported. Undoubtedly, this means that mortgage rates will rise and house prices will fall more.

Everything from eggs, energy, and insurance eats up hard-earned paychecks. In his view, Fed Chair Jerome Powell will not be happy until he raises enough rates to bring inflation under control. That’s a job killer. This also points to a spiral in consumer confidence.

Similar to setting goals and working towards a promotion or a raise, now is an excellent time to start preparing for your first or next real estate purchase.

Don’t expect mortgage rates to improve significantly by the end of 2023. Don’t be surprised if mortgage rates hit 7% by the summer. Don’t expect house prices to bottom out until early 2024. The preparation time is on your side.

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Here is my checklist for funding readiness:

— How much money can you cobble together for your down payment? Write it down.

— Review your stash monthly and stay on track.

— Set a realistic monthly principal and interest, property tax, home insurance, and HOA appraisal budget for the home payment; Don’t forget to include utility bills.

Real estate agents and mortgage loan originators tend to inflate their numbers because their paychecks are based on sale price and loan amounts. Stay in your middle and comfort zone. Nobody will be there to help you after the escrow has closed.

— Consider non-obvious sources for the down payment and closing costs. For example, some banks offer generous assistance to low- to middle-income borrowers and certain neighborhoods. Municipalities also offer programs. Nonprofit organizations and employers are also potential sources. Real estate agents and mortgage lenders may be able to contribute to your comparison fees. Always ask.

— Speak to a mortgage expert now to learn how to optimize mortgage origination costs relative to your down payment and FICO credit score.

“This is Robinhood pricing with no real justification,” said John Ulzheimer, credit expert and president of the Ulzheimer Group.

— Be wary of hard-line recommendations from real estate agents to mortgage lenders. It’s been a famine in home and mortgage sales for almost a year. It’s getting worse. Bribes are everywhere. It always costs the borrower more in mortgage interest or expense when mortgage lenders pay referrals.

– If you don’t have money to burn, or really come across a unique home, don’t buy a property for the next 10 months unless you can strike a deal that’s at least 10% cheaper than the property’s fair value today. There is no doubt that home values ​​will continue to fall.

— California rents have fallen for five straight months. Talk to your landlord about a rent reduction. Or calculate the savings potential if you find significantly cheaper accommodation. For owner occupiers looking to move up, does it make sense to do two moves? Rent out your home with significant financial benefits while renting temporarily. In both cases, what about the parasite on mom and dad?

— Hide your credit cards. Stop spending except for real necessities. Larger purchases such as cars and appliances should be delayed until after the home purchase.

“Avoid taking on new debt commitments before applying for a mortgage. This will help control the DTI (debt-to-income),” said Ulzheimer.