What to do if your home buying plan was abandoned this year?
(NerdWallet) – Millennials are in peak nesting mode. We want the freedom that many apartments lack, or the space to grow that a family home doesn’t offer. There’s just one not-so-small problem.
(gestures broadly at everything.)
According to the National Association of Realtors, the median selling price for existing US homes in August was $389,500. That’s up 7.7% from August 2021. According to Freddie Mac, the average interest rate on 30-year fixed-rate mortgages was over 6% as of September 15 of this year. Compare that to an average rate of 2.86% just a year earlier — that’s a 110% increase.
It can be difficult to keep up when an open house feels like a cage fight. It’s enough to make someone want to retire to a rented apartment for a while. “We’re seeing that those who thought about buying a home are just not interested anymore,” says Natalie Slagle, a board-certified financial planner and founding partner of Fyooz Financial Planning based in Rochester, Minnesota. “People are less willing to make big financial moves when it feels like there is uncertainty.”
While you may feel stuck now, you don’t have to be forever. Here’s what to do in the meantime.
Reevaluate your current situation
By slowing down your apartment search, you’ve bought yourself extra time. You can reevaluate what is realistic for you. Over the next year or so, your life can change a lot, which means your list of home must-haves might need a few tweaks.
When Jason Fletcher wanted to buy his first home in Orange County, California in 2019, he was single. At the time, he didn’t find The One real estate-related, but it wasn’t long before he met his now-wife. They are currently expecting their second child and are still hoping to trade their rent for a home of their own that is very different from what Fletcher was looking for three years ago.
However, your search fails. “I would say right now, at least in our area, we haven’t seen a big increase in inventories,” he says. “It shows me that people are happy with the interest rates they have and are not selling.”
Amanda Astey moved to San Francisco with her husband seven years ago. After living in the city for two years, they considered buying a house but backed out after being unable to find anything in their price range at the time. Now they have progressed in their careers and are ready to resume the search. “Even so, we were pretty discouraged,” she says.
They’re open to living further from the city — and even leaving the state in search of more room for the money. “We had a huge exodus of friends to Portland. A whole bunch of friends went to Denver,” she says. “It seems increasingly likely that another city would be our best option.”
Become an even more attractive buyer
If your budget and mortgage preapproval were so-so this time, take the next few months to shore up your finances so you’re in a stronger position later.
One starting point is discretionary spending. If you can reduce, and potentially increase, your income through a promotion, job, or freelance work, you can increase your savings and be prepared to make a larger down payment. You may also be able to increase your overall budget for a home. Fletcher and his wife cut back on new clothes and keep their paid-off cars longer to avoid car loans. “Right now we’re trying to make more money and get promoted,” he says.
Paying off existing debts can also help, as it lowers your debt-to-income ratio.
A higher credit score can help you qualify for better mortgage terms and hopefully ensure you get the lowest possible interest rate. If you already have great credit, maintain it by paying your bills on time every month. Late payments can affect your balance and you’ve already worked hard to get where you are now. If your credit score is lower, making payments on time can still help you, as can restricting what other loans or credit cards you apply for in the months before applying for a mortgage.
Adjust your interest rate expectations
Sometimes your life plans don’t match economic conditions, so you might not be able to wait indefinitely for interest rates to go down (assuming they will, which is never guaranteed). In that case, you’ll have to deal with higher monthly payments, and if interest rates fall in the future, you can refinance. You may have to make some concessions to take out a more expensive loan, such as B. reducing your overall budget or expanding your search to a larger area.
Phil Lawson, a real estate agent in Richmond, Virginia, notes that even now, interest rates are historically low. When he bought his first home 20 years ago, he paid 7.6%.
“It’s a stupid stereotype, and I’ve said it over the years,” he says. “Marry the house but date the price.”
Suggest a correction
https://wgntv.com/news/what-to-do-if-your-homebuying-plan-got-scrapped-this-year/ What to do if your home buying plan was abandoned this year?