With strong job growth and millennials’ movement into prime home-buying age, the single-family home market is heating up. Unfortunately, supply is not keeping pace with demand. Inventories of existing homes are very tight, and new construction is moving slowly. Competition for listings is intense, and home prices have been rising faster than income growth. Before you start house hunting, you will need to shop around for a mortgage that meets your needs. Here are a few things to keep in mind.
1. Understand Your Budget
Affordability is a real issue in this market. Remember that your monthly payment will include not only principal and interest, but also homeowner’s insurance and property taxes. Also, don’t forget that in addition to a down payment, most people will have closing costs that can be significant.
2. Understand the process
Talk to people you know who have recently purchased a home and ask about their experience. Ask your lender about the process and timeline so that you’re prepared when it’s time to make an offer on a home. Know your credit history. Then be sure to ask what to expect after you make an offer.
3. Talk to more than one lender
Get recommendations from friends and your real estate agent. Explore the different mortgage products they offer, especially those for first-time homebuyers, like federally-insured FHA loans and other loan types with lower down payments. Choose a lender that’s responsive and helpful.
4. Help your lender work for you
Once you make an offer on a home, you’re working with a deadline: the closing or settlement date. There will be a lot of forms and documentation needed beforehand. A good lender will help make sure that everything goes smoothly. Increasingly, a lot of the process is being done online, or even on your smartphone.
If you understand the process before you start house hunting, you’ll be moving into your new home before you know it.
Robert D. Broeksmit, President and CEO, Mortgage Bankers Association, [email protected]