This past year has come with a significant amount of change and shifting trends within the housing market is no exception. While interest rates are low, the path to securing a home can be competitive with low availability and homes selling well above listing price. While this can be overwhelming, remember that there are certain ways to better navigate your search when purchasing a home in 2021.
1. Choose your realtor wisely
When purchasing a home this year, you will most likely face inventory challenges which in turn can drive the price of homes up. When you are purchasing in a competitive market, you will want to have all of your i’s dotted and t’s crossed, including establishing a relationship with a realtor. When looking for a realtor, you will want to ensure they have experience and in-depth knowledge about the area you are purchasing a home in. Interview realtors ahead of time to make sure you feel comfortable working with them and that they will help you yield the best outcome in your home search.
2. Consider your interest rate
While purchasing a home in a competitive market is certainly a challenge, remember that interest rates in 2021 are historically low, which is one of the benefits of buying a home this year. Remember to do your research and shop around for the best interest rates. Even though a one percent difference doesn’t initially seem impactful, it can make a significant difference on a large amount of money over an extended period of time. While you may choose to finance your mortgage over the span of 30 years, consider looking into shortening this term if you are in the position to do so. When interest rates are this low, you might be able to shorten your mortgage term from 30 years to 25, 20, or even 15 years with little difference in your monthly payment. This can help with your overall bottom line because by paying a bit more each month, you can save a considerable amount of money overall.
3. Make financial preparations
No matter when you decide to purchase a home, it’s always important to make adequate financial preparations beforehand. While you are most likely aware of the upfront costs associated with purchasing a home and have a price point set in mind, remember that there are indirect costs to account for as well. For example, you will want to set aside a higher budget for utilities if you are moving to a larger space or have an emergency fund built up for repairs that need to be made after you move in.
Another financial preparation that is often overlooked when purchasing a home is ensuring that you have life insurance coverage. While you might have life insurance through your employer, remember that as a homeowner, it’s important that your coverage would protect anyone else who lives in the home with you if something were to happen to you. The majority of employer-sponsored policies would not adequately cover your financial mortgage contributions should you unexpectedly pass away so it’s important to keep this in mind when preparing to purchase a home.
4. Determine how long you plan on staying
While it’s hard to predict what the future holds, it can be helpful to have a general timeline in mind of how long you plan on staying in this new home. This can better help you navigate your search to make decisions about the features you are looking for in a home. For example, is this going to be a starter home that you only plan on staying in for 5 years or so? Or do you anticipate this being your forever home?
If this is a starter home, you might consider purchasing a home that is low-maintenance and an easy transition from your current residence. Conversely, if this is going to be a home you see yourself living in for the long-term, perhaps you aren’t necessarily looking for something move-in ready and can take more risks. Additionally, by projecting forward and considering your 5-10 year plans, you can better have an idea of what you anticipate needing in a home. For example, if you are looking to expand your family, that can help delegate your search based on things like the number of rooms you need or the yard size you’re looking for.
5. Establish your needs versus wants
When looking for a home during a time when homes are selling for above market value, it can be helpful to have a needs versus wants list. Because this is such a competitive market for prospective buyers, there might be features that you were looking for in a home that you may have to settle on. This is why it is helpful to establish items and features in a potential home that you absolutely need compared to features that are just nice to have. This puts you in a better position to make a quick decision to put in an offer on a home, which is sometimes necessary for this market.
It can also be helpful to have a discussion with all decision-makers before you begin your search to determine how much work and updating you are willing to do to the house after moving in. For example, are you handy and willing to make improvements yourself, or are you looking for something that is more “turnkey”? This can help you navigate your search in a highly competitive market as well.
Purchasing a new home is a significant milestone but when searching in a competitive market, the process can be overwhelming. Remember to try to leave emotions at the door and don’t be afraid to switch up your strategy if you find something isn’t working. By keeping these considerations in mind, you’ll be better positioned to find the house you are looking for this year.