To wrap up this year I wanted to spend the last blog post of 2023 looking ahead to the new year. Specifically I’m going to focus on helping any renters with the financially-savvy new year’s resolution to buy a home in 2024. If you’re wondering why such a resolution is financially-savvy, check out my previous blog on renting vs owning a home.
I thought I’d take some time going over best practices for preparing to enter the housing market and cover what to expect as you begin to search for your new home.
First off, I have to acknowledge that the housing market for potential buyers has been particularly tough over the last few years, especially for first-time buyers unable to capitalize on the equity of an existing home to help offset the costs of today’s higher home prices.
But there are several reasons to be optimistic about the prospect of finally owning a home in 2024. Recently the Federal Reserve announced plans to lower the interest rate throughout the next year. According to sources, the rate could drop as low as 4% by the end of next year, giving buyers a lot more spending power.
With a little more spending power and continued diligence, patience and an astute real estate agent, buying a home in 2024 is anything but farfetched.
Building on this positive note, I’ll dive into the things prospective first-time buyers should do to set themselves up for entering the housing market and finding the home of their dreams.
After finding a reliable real estate agent, the next best thing for the first-time buyer is contacting a mortgage broker and working with them on a mortgage pre-approval. A mortgage broker will look at your credit, your debts and income and from all that information determine how much money a bank is willing to lend you to buy a home.
Going through a mortgage pre-approval process will put you in a great position to move forward into the home buying process. Not only will you come out of it with a confident price range for your home search, but you’ll have in place many of the necessary financial documents you’ll need when you have an accepted offer and go through the underwriting process with your mortgage lender.
I’ll pause here to discuss what to expect when you start the pre-approval process. The first thing your mortgage broker will do is run a credit score check. This is a necessary evil of the process.
Preparing all your financial documents is the next necessary evil, and a tedious one at that. These include tax documents, W-2s from your employer or employers, and recent pay stubs and bank statements. Fortunately, most of these documents are all online these days and can be gathered easily enough from your computer chair.
For those who work for employers who still provide paper pay stubs, get in the habit of keeping all of them until you’ve closed on your new home.
On the financial side of preparing to buy a home, there are a couple small items to be cognizant of too. Any large deposits on your bank statements will raise flags for potential lenders. Keep this in mind if you’re depositing any big checks into your bank accounts. (Note: this is not a deal breaker by any means – only something that will require an explanation).
Another factor lenders look at is your work history. Consistency is key here. Working for the same company or in the same industry shows stability to potential lenders and allows them to accurately and confidently predict your income and spending potential over time.
I don’t want you to get too bogged down with these details. These are things that get etched out well after you’re through the home search process and are working toward closing on your home. I bring them up only because they are smaller details that one should be aware of and that often surprise home buyers.
With a credit score check and all the required documents comes the exciting part: having a mortgage pre-approval and being ready to put in an offer when you find your dream home.
You might wonder how one goes about finding a mortgage broker. This step shouldn’t be rushed or taken lightly. Your mortgage broker will be taking your financial information and using it to determine your potential spending power. You want a trustworthy broker who is open about your options and is looking out for your best interest.
There are many great mortgage brokers out there, but I recommend asking friends or family for a good recommendation, or, better yet, you can go through a trusted real estate agent. Real estate agents interact with mortgage brokers on a daily basis and often have a great pulse on the best in their local area.
For those in the early stages who are not quite ready to commit to talking with a mortgage broker, but are still committed to buying a home in 2024, there are some simple tips for getting yourself into great financial shape for a pre-approval before you agree to a credit check and start sending over any financial documents.
The most important thing to do is check and monitor your credit score. This is a great resource for what to look for when checking your own credit.
The best way to improve your credit in the short term is paying off large debts, if possible. Obviously, this isn’t always feasible. Consider consolidating debt or refinancing large-interest loans to help make your debt more manageable.
For those looking for great tips for improving your credit score, check out this post from NerdWallet.
The prospect of buying your first home understandably comes with anxiety and excitement. The process presents new and unexpected challenges with an obvious and worthwhile reward. Luckily, you have great professionals to help you through every step.
Your trusted real estate agent and mortgage broker work for you, answering any questions and following up to make sure you have everything you need to make your resolution a reality.
If you have any more questions or want to set up a meeting to discuss the process of buying a new home, message me today.
Wishing everyone a safe, peaceful, healthy and happy new year!
