Buying a home in today’s market is incredibly competitive, and first-time homebuyers are especially struggling. Many homes are being sold for tens of thousands above their market rate, and the good homes are getting bids before buyers can even think. What’s causing this, and how can you compete?
Rising Material Costs Are Slowing New Home Production
The global pandemic has brought us supply chain issues, rising inflation, and increased importance on housing (especially with how many people are still working from home). These factors have all contributed to rising home costs and long lead times for new constructions. This incentivizes people to buy a pre-existing home instead of building their own, and that will increase market competition.
People change homes for a number of reasons. Divorces, marriages, kids leaving, or growing families all can cause the need for a new home, and all of these situations will compete against each other for a finite amount of homes. The supply of homes is not growing to meet the current demand, especially with a bulk of millennials still entering their “home buying period.” Older home buyers have had more time to accrue more wealth and can use these extra assets to pay 120% on a home and avoid the bidding war. This is very profitable for the seller, but also creates a huge barrier for first-time buyers.
Should I Wait to Buy?
Perhaps not. Prices have risen significantly since 2020, and rates are estimated to continue to rise into 2022. Besides, sometimes life can’t wait. But don’t fret, just because there is competition doesn’t mean you can’t win a bid.
What Can You Do To Help Buy a Home in Today’s Market
The painful truth is: be prepared to go above the asking price or else your competition will. You can’t make an offer you can’t afford, of course, and that’s where United Financial comes in. One of the first pieces of advice you’ll probably receive if you’re interested in buying a home is to get pre-approved for a mortgage before you shop.
A pre-approval letter states that a lender has tentatively agreed to loan you up to a certain amount of money to purchase a home. It helps determine how much house you can afford given your current financial situation. That way, you’re not shopping for homes that are outside of your budget. Having a pre-approval letter in hand also tells the seller you are ready and can help make your offer get taken more seriously.
Documents To Provide When Getting Pre-Approval
Here’s some paperwork you may need to during the pre-approval process:
- Township Assessed Value Letter
- Current Mortgage Statement, if Applicable
- Most recent Property Tax Bills
- Divorce Decree, if applicable
- 1 month of your most recent paystubs
- 2 years of W2s
- 2 years of signed Federal Income Tax Returns with proof of filing
- 2 years of signed Business Federal Income Tax Returns with proof of filing
- Homeowners Insurance Quote
- 2 months of current Bank Statements
- Current 401k/Investment Statements
- Social Security Benefit Notice
- A Purchase Agreement if you have one
Get Pre-Approved Today
Start the pre-approval process with United Financial today so you can start creating memories in your new home!