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Advice for renters priced out of homebuying

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Today’s housing market can feel like a dream killer.

Rising mortgage rates, soaring home prices, and a shortage of properties for sale deliver a one-two-three punch.

If you’ve been knocked out of too many deals and need a time-out, here’s how to regroup and keep your homeownership dream alive.

take a break

According to a June 2022 National Association of Realtors press release, rising home prices and interest rates have pushed monthly mortgage payments for single-family homes with a median 10% down payment to nearly $800 since January. jumping up

it’s huge.

If you’re too tired to think clearly or just too expensive, it’s okay to pause.

Catalina Franco-Cicero, certified financial planner with Tobias Financial Advisors in Plantation, Florida, said: “It’s okay to do that.”

But retreating does not mean giving up.

Nathaniel Moore, a certified financial planner in Fresno, California and president of Agape Planning Partners, said:

Strengthen your finances

See your vacation as an opportunity to further improve your financial situation.

budget like a homeowner

use mortgage calculator Estimate monthly mortgage payments including property tax and home insurance estimates. Then add his 20% of utility bills and monthly mortgage for unexpected maintenance and repairs, Moore suggests. Subtract your rent payments from that amount and keep the rest in your high-yield savings account.

“That way, if you can go home, you won’t be shocked or find yourself wealthy and short on cash because you haven’t factored in other expenses,” Moore says.

He likens the transition to a relay race.

“We need a smooth baton handoff from ‘renter’ to ‘homeowner’. “If you’re not ready to step into that house and can’t afford the ancillary costs of living in it, that’s when the baton fails and falls,” he says. I want to get to where I’m running as fast as I was, so I can transition smoothly when the baton is passed.”

When you’re ready to buy, you can add it to your down payment. This can lead to stronger offers and better fulfillment. mortgage interest rate.

“Anyone who can accurately predict interest rates, inflation, and house price growth in a relatively short period of time,” Eric Lefkowitz, president and COO of Motto Mortgage Mint in San Diego, said in an email. no,’ he said. “But buyers certainly need to save for a strong down payment option, which ensures they get the best interest rates available when they need them.”

repay the debt

Paying off credit cards and other debt can improve your credit score and Debt-to-income ratio, or DTI. Both are important factors lenders consider when deciding if they are eligible and what the rate is.

A good DTI (debt to gross monthly income ratio) is generally less than 36%. The lower the better.

Your credit score is based in part on your credit utilization rate, which is the percentage of credit available. Reducing your debt will lower your credit utilization and improve your score. In the meantime, continue to make timely payments to maintain good credit.

Deb Gillard, real estate agent at RE/MAX Venture in Owatonna, Minnesota, said:

Avoid big spending on options

Resist the temptation to vent your frustrations on a splurge, like depleting your credit card balance or buying a new car when your old one suffices.

“It’s the last thing you want to do when you’re doing this pause,” says Gillard.

Another temptation might be to move to a better apartment. But stay put if you can, advises Peggy Pratt, a real estate broker who leads his team at Pratt Properties in the Boston area of ​​Century 21 Northeast. Paying a security deposit and other moving costs can help you save on your down payment.

Reassess your wants and needs

This is a good time to see the big picture.

“People have to go soul searching to say, ‘What do you want out of your home,'” Moore says.

Given house prices and mortgage rates, you may need to adjust your filters. You may need to buy a home in a different area or buy something smaller than you originally envisioned.If your intention is to buy starter homebuild equity and upgrade in a few years and that flexibility could pay off.

“Homeownership is a gradual opportunity,” Lefkowitz said. “You’re not committed to staying home forever.”

Another option you might consider if you can work elsewhere is to relocate to a cheaper housing market, says Franco-Cicero. Pausing gives you time to research the quality of life and cost of living elsewhere and consider whether you’d want to live elsewhere.

Communicate with Agents and Lenders

In addition to fine-tuning your financials and reassessing your goals, Lefkowitz said you can keep in touch with trusted experts, monitor the market, and roll back when you’re ready.

“This includes strong real estate agents and mortgage experts,” he said. “This partnership allows us to put the best interests of our buyers first and be ready to rush to great properties when they become available.”

For example, let them know if you can pay a larger down payment. Keep your agents updated on when you’re ready to return to the market and the types of homes and neighborhoods you’d like to consider.

Pratt says he advises clients to maintain realistic expectations and not give up.

“Wait a minute,” she says. “Something is Coming”

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Barbara Marquand writes for NerdWallet. Email: [email protected]Twitter: @barbaramarquand.

article Advice for renters who got a discount on their home purchase First appeared on NerdWallet.

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