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Tips for Home Buying in a Seller’s Market

Mar 30, 2021 06:00AM ● By Pamela Johnson
By Ashley Kazijian, Contributing Writer

With so much uncertainty going on in the world right now, taking the plunge to buy a home may feel like the last thing on your mind. However, the right time to buy a home doesn’t depend on the COVID-19 pandemic or how the market is doing, it depends on you. Mike Shain, loan officer from Bay Equity Home Loans, hosted a virtual home-buying seminar on Monday, March 15th, wherein he broke down the process of home buying and the resources available to support buyers from mortgage pre-approval to closing.

According to Shain, the current market is very competitive because of low inventory and buyers at every price point. Therefore his first piece of advice is for the buyer to always put their best foot forward right away. With most sellers receiving multiple bids, it’s best to go in with a strong pre-approval and to also be prepared to go over asking price. A pre-approval is the first step in the home buying process; it will come from your lender and be primarily based on your credit reports, income verification, debt, and source of funds. Typically you will only be shown properties after you have a pre-approval, as this depicts your affordability.

Shain recommends buyers start the pre-approval process sooner rather than later. Often he finds buyers come back with incorrect information on their credit reports or their credit score needs some help. Not only would the benefit of time help you correct information on your credit report, but there’s also the potential to raise your credit by following the recommendations of your lender. The higher your credit score is, the better the rates you'll be offered, and the lower private mortgage insurance (PMI), which insurance lenders require to protect them in case of default or foreclosure.

Quite possibly the biggest deterrence to starting the home-buying process is thinking about the down payment. Shain reiterated that buyers do not need 20% down. It’s important to know about the mortgage programs available such as Federal Housing Administration (FHA) loans or Veterans Administration (VA) loans. Programs like these require as little as 3% down payment, or 0% for VA loans.

After you have your pre-approval, finding a real estate agent would be your next step. Shain explains how important it is to find an agent you can connect with and someone who understands what you are looking for. You also need to trust that the agent will negotiate for you, as this is an important part of the process. This is likely one of the biggest purchases you will make in life, so working with the right people is a huge piece to home-buying success. An agent’s primary responsibilities include assisting the buyer in searching for properties, touring homes, negotiations, and recommendations for attorneys and home inspectors. Buyer’s agents are compensated from the listing office.

So once you have your pre-approval and you’re working with an agent, you’ve found your dream house and your agent submits your offer to the seller. In the current market, the seller is likely receiving multiple offers. Because of this, (in addition to offering over the asking price), Shain would advise against using the home inspection as a negotiation tool, and recommends keeping requests to a minimum as the seller can move on to other buyers. Closing costs are another consideration you’ll need to keep in mind. These can range anywhere from $6-$8k, depending on taxes and insurance, according to Shain. Buyers can ask the seller to pay some of the closing costs, though it’s unlikely for the seller to agree. Other options are to pay out of pocket or requesting the lender to price the loan a little bit higher for the closing costs.

Shain says that you should start your home-buying process when you decide the time is right for you, regardless of how the market is or when it flips back to a buyer’s market. If you’re secure in the necessary ways to take this step, then that should be what you base your decision on.
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