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A lot of things have changed in the world in 2020, let alone the real estate market. It can be harder to buy a home nowadays, but it is definitely not impossible. You may end up spending more time looking for houses in your price range, and it might take longer to get to your closing date. However, homebuyers who are realistic, communicative with their real estate agents, and patient will end up on top. Here is how to buy a house in 2020.
1. Stay Abreast of Current Home Buying Trends
As of right now, listed homes are staying active in the market for sub 30 days. Families are pooling their resources and buying homes several states over, just so that they can have stability for the future. The long story short is that things are very different than they have been in the past. You should know what the current home buying trends are in the areas where you want to purchase a house. These trends can shift over a week or even a quarter, so see what may have changed between now and the last time you looked.
2. Evaluate Your Credit
The absolute biggest change to the mortgage and real estate industries in 2020 is the changes in credit requirements for applicants to even be considered. Some home lenders that formerly required applicants to have a minimum of a 620 credit score are now requiring them to have at least 720. (Source) As it can take several months or even years to improve your credit score, this change can become a challenging adversity for homebuyers to overcome. Ahead of buying a home, you have to evaluate your credit score and file carefully. Work on building up your score and getting rid of any negative information that could prevent you from buying a home.
3. Have Your Down Payment Seasoned
Mortgage companies consider the finances of their applicants very carefully before ultimately issuing a denial or approval. So, in addition to having a stable source of income and good bill-paying habits, lenders also need to see how you are preparing to buy a house. Regardless of whether you have a 10 percent or 25 percent down payment ready, it has to be seasoned in your bank account. Seasoning refers to the amount of time you have your down payment funds sitting in one of your bank accounts, preferably collecting interest. You cannot touch these down payment funds for any reason, and it has to be documented where they came from.
4. Eliminate Unnecessary Debts
Ahead of buying a home, you should be trimming off the fat and getting rid of any debts you don’t want to follow you. For instance, now is the best time to pay down credit card balances and pay off student loans. Not only will this help to improve your debt to income ratio, it can also greatly improve your personal credit scores. Being able to pay down all extraneous debts prior to closing on a home can only help you towards achieving your home buying goals faster.
5. Don’t Submit New Credit Applications
A lot of people who buy houses also end up taking on new financial responsibilities. You could need to open a new credit card in order to furnish your home, or maybe you plan on trading in your car to get a more dependable vehicle soon. Whatever you do, don’t submit any new credit applications right now. This could delay getting approval and complicate the underwriting process.
6. Compare Mortgage Companies and Loan Programs
Since you have time on your side, this is when you want to see what all of the various mortgage companies out there can offer you. Home loan rates are historically low, and there are fewer applicants than ever before. Therefore, if you are a strong applicant, you might be surprised at what you can be approved for. See how you can get a reduction on interest rate points, qualify for a more expensive home, or quality for no closing costs.
6. Be Willing to Wait
As of right now, it is still very much a seller’s market, and it may continue to be that way for the remainder of 2020. There are historically fewer houses on the market, and there is an influx of motivated buyers coming out of major cities who have the money available to make cash deals. So, while you will be facing a number of uphill battles, the tool that you have on your side is your ability to remain patient. Deals will fall through as other potential buyers become impatient.
Buying a home in 2020 may be more challenging than it was in past years, but you aren’t out of the running yet. Have all of your documents ready for your loan officer so that you can get a quicker approval. Save more money for your down payment and work your credit so you can buy the house of your dreams.
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This content is brought to you by Hannah Madison.
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