Thinking of buying a new home?
A Huge Undertaking
Owning a home is a huge undertaking, but a potentially rewarding one. When you buy a place of your own, you get to build equity in an asset that can increase in value over time. You also gain the stability of not having a landlord who can opt to not renew your lease. And, you can call the shots. Want to adopt a dog? That’s your choice. Want to knock down a wall? Go for it (with caution, of course).
Housing inventory has been extremely tight during the pandemic, and that’s worked to sellers’ advantage by fueling demand and driving home prices upward. It’s too soon to know what inventory will look like in 2022, and much will depend on how the pandemic plays out. But at the very least, expect limited inventory at the start of the year — and understand the drawbacks that go with it.
Budget Your Needs
In addition to inflated prices, you may get stuck buying a property in disrepair if you insist on becoming a homeowner in 2021. Or, you may have to compromise on the square footage of your home. Make a list of must-haves for your home and stick to it so you don’t wind up settling for a place with a bunch of features you’re unhappy with.
WOW - Look at the Mortgage Rates
Mortgage rates recently hit their 14th record low, so they’ll likely hover at ultra-competitive levels for at least a while. In fact, while mortgage rates may climb as 2021 progresses, there’s a strong chance they’ll stay attractive throughout the year, especially as our economy attempts to stage a recovery. That gives you a great opportunity to snag some savings — that is, if your credit score is excellent. If your score is poor, you may not be able to get a mortgage at all. And if it’s mediocre, you may qualify for a home loan, but not at the astoundingly low rates you keep hearing about.
Check Your Credit
That said, there are steps you can take to boost you credit fairly quickly. First, start by paying every incoming bill on time, as that’s the most important factor in calculating your score. Next, if you have credit card debt, aim to pay off a chunk of it. Doing so will bring down your credit usage and help your score improve. Finally, check your credit reports for errors. Fixing a mistake that works against you, like a delinquent debt that’s not really yours – could be a huge help.
Is 2021 the right year for you to buy a home? If you’re tired of renting, are financially stable, and have socked away adequate funds for a down payment, then it might be. But be aware of what the housing market looks like before you jump in, and do everything in your power to make yourself as strong a mortgage candidate as possible.
There is a Difference
Do you know the difference between mortgage “preapproval “and mortgage “approval”? The difference is very important and should be understood by all buyers, especially in an inflated market.
Mortgage preapproval is when you talk to your lender about how much you can afford based on your income.
Mortgage approval is when your lender determines based on an appraisal if the property you wish to purchase is worth what you offered and whether they will lend on that property.
There are Hidden Dangers
It is dangerous to assume you can rely on a mortgage preapproval to avoid or waive/fulfill a mortgage condition in your offer to purchase.
In the recent past, 2017, we had a similar market to that of today. We had multiple offers and prices over list. The problem was people put in offers over the list price in April and May while prices were inflated but a closing of July and August or later. The market cooled mid July and prices decreased.
People found themselves without mortgage approval because most lenders do not appraise the property until close to the closing date after the financing condition has been waived. Be careful to not be caught paying over list for a property that will not be appraised at that value when you attempt to close.
How do you protect yourself?
One, insist that your lender appraise the property BEFORE you waive your financing condition.
Two, close within a month of your offer to attempt to close in the same market conditions as when you made your offer.
Your Real Estate Lawyer...
If you are successful in finding your new home make sure to use a Real Estate Lawyer to complete your offer and review your mortgage details.
This will definitely help to make your decision of purchasing a new home much more stress free.
Introducing Shari Elliott of Elliott & Elliott
This article has been brought to you by Shari Elliott, of Elliott and Elliott, Barristers and Solicitors.
Shari Elliott has extensive experience in all aspects of residential and commercial real estate transactions. She is an educator regularly giving presentations to real estate agents.
Uniquely, Shari is also a leading practitioner in environmental law. She assists parties with assessing and allocating the risk of properties with environmental history.
With Shari’s knowledge in all aspects of Real Estate Law, call her, before you sign an offer to purchase. It’s the wise thing to do.
Written By: Jane Laker
Photo Credit: Stephen Elliott