4 things you should focus on if you want to buy a home within the next year
As most of us Californians know, all-cash offers are king. An analysis by Redfin concluded that nearly one-third, or 30% of home purchases in the United States were paid for with all cash, which is a 25.3% increase from 2020, and comes just behind 2014 with 30.6% of homes were purchased with all cash. With these trends expected to continue into 2022, it’s important to put together a plan of action to get ahead of potential competitors, especially if you’re looking to purchase in the next year. Here are four main things to focus on:
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Improve your credit
Your credit score is one of the biggest things that lenders consider when you apply for a loan. Two major ways that you can improve your credit is by paying your bills on time in full and keeping your credit utilization low. According to the Federal Reserve Bank of New York, the median score of new mortgage borrowers in 2020 was 786. If your score isn’t 786, you’ll still be able to get a mortgage, but expect much higher interest rates, of course.
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Research down payment options
To avoid PMI, you’ll need to put down at least 20%. But as we mentioned earlier, all-cash offers are king. So, especially if you’re looking to purchase a single-family home in any metro area of California, it’s almost guaranteed that you’ll need to put down more than 20% in order for your offer to be competitive. However, there are down payment assistance programs that can provide down payment help to eligible buyers. California offers the California Housing Finance Agency MyHome Assistance Program, which may be a route for Millennials as they enter into prime first-time buyer age. However, down payment assistance programs can potentially make your offers less competitive to some sellers, so be mindful of that while looking. With 1 and 2-bedroom condos spending a longer amount of time on the market than 3+ bedroom condos, townhomes, and single-family homes, a down payment assistance program could be more desirable for owners looking to get 1 or 2-bedroom condos off of their hands.
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Be nimble
When searching for a home in any of California metropolitan areas, time is of the essence. According to the National Association of Realtors, the average home lasted 17 days on the market throughout November. An agent in Walnut Creek recently stated that she worked with one client that bid on a home listed at $399,000 in Livermore. That home received 57 offers. The client came in at $615,000 and still lost out – the home eventually sold for nearly $700,000. In this red hot market, it’s important for buyers to do as much upfront approval work as possible, they must visit the home quickly, and they must prepare to decide and extend an offer almost immediately.
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Don’t overpay
Even though we just mentioned a home in Livermore selling for nearly $300,000 above asking, it’s important to be competitive, but sharp at the same time. Know what homes are worth because there are some sellers that are pricing homes at far too high prices. A way to avoid being grossly overcharged is by comparing home prices from the year before in that area. If the home is listed at a much higher price than the previous year, it might be best to pass it up and wait for the next home to pop up on the market.