To say that the housing market has been a popular conversation of late is an understatement. Blogs, tv shows, social media, movies and more have shown millions how with just a bit of money and creativity, they can invest in real estate and find passive income that lasts for years. Buying a house now brings on completely new opportunities than compared before. Yes, you still need to buy a house for yourself, but you have the opportunity to make money off of it within the first weeks of owning it.
The internet has made it easier than ever to find renters, even ones who just need a place to stay for a couple of days. This means that anyone who wants to buy a home can almost immediately find additional income once they purchase the home to help cover the costs. This is a great advantage that has given plenty enough motivation to buy, even if the time isn’t perfect, because they know that they will not have to cover the costs on their own.
Before You Can Buy
While you may want to buy, you have to be aware of the regulations and restrictions that can impact your capabilities as a buyer, whether you qualify and also what type of property you can afford. Keep in mind, your income is only part of the battle. What you owe each month and how you manage your money will also be reviewed. Here’s what you need to have in place if you want to be considered a buyer:
- Strong credit score: Before you take out a loan, part of what you pay monthly will be determined by what your credit score is. One common myth is that banks will reject you because of a low score. This can happen but more often what happens is that they approve you, but with a rate much higher than you would want to pay. Get your credit up and it will save you thousands a year.
- Money saved up: The down payment on a property is a big advantage to a buyer because this is your opportunity to lower how much money you have to borrow. Coming in under 20% means you also have to take out mortgage insurance which adds hundreds of dollars to your payments. Save up as much as you can so that your monthly payments are lower.
- No debt: Your income-to-debt ratio will determine how much money the lender can actually provide you. Because of this, you want to make sure that your income is as high as possible and that you are debt free. The better these numbers are, the more money you will be able to borrow from a lender. This is something lenders have little say over as well.
- Experienced realtor: Working with an experienced realtor can help you determine if you are ready to buy, not only based on these factors, but the state of the current market and your area. If you are not a qualified buyer, your realtor will show you what you need to do to improve your situation.
Making some of these improvements could take months or longer. You need to consider your situation and what your options are. However, not being a quality buyer means paying more on your loans and struggling to get properties over other, more qualified buyers.
You Should Rent
If you are not able to get a solid credit score, get your debt paid off or save up for a down payment, you may want to consider continuing to rent. It can be frustrating, especially with home prices so high, to cover the cost of a new home, even a down payment. 20% of a $500,000 property is still $100,000 meaning that’s what you have to put down on a property in order to still owe $400,000 on it. That’s a lot of money and if you cannot cover those costs, especially upfront, renting may be a smarter option for you.
If you are focused on buying, you need to consider renting a smaller or more affordable place if it will help you to save up, pay off your debt and improve your finances. Renting is not a bad option, especially in the short-term as you wait for the right time and the right property.
You Should Buy
If you are looking to buy and no longer interested in renting, you need to focus on those factors and make sure you qualify for a loan at a great price. The next step is to focus on your budget for a property and where you want to buy. If the neighborhood you are looking at starts in the $700,000’s and you cannot cover anything over $500,000, you need to look in a new area for a property.
Interest rates are expected to go down soon and if that’s the case, and you find the right property, you need to go after it, especially if it’s the best option you have seen in a while. Improving your chances of getting the property you want isn’t about having the best offer, it’s about being the best candidate and showing that you are ready to buy and qualified to do so.
What Your Realtor Recommends
An experienced realtor is going to review your finances and options and show you what way is best for you based on your goals and where the market currently is. If you are not sure where you currently stand as a buyer, look at your credit score, income-to-debt ratio as well as what you have saved up. While these may not be in the best shape now, you could make solid improvements within the next three to six months.
If that’s too long to wait to buy a home you need to work with your realtor to determine what options you have and how to find a property in your desired area. Every property is different as is the buyer which means you need to work with your realtor to first determine if you have a shot and if so, will it work out? This cannot be determined online so the best way to get answers is by reaching out to an experienced real estate agent today.