Home News How to buy a home in a cooling market, according to top-ranked advisors

How to buy a home in a cooling market, according to top-ranked advisors

by admin
0 comment

Leo Patrizi | E+ | Getty Images

Being a homeowner can be difficult enough under the right circumstances.

Add in rising mortgage rates, rising home prices, and relentlessly high inflation—the current homebuying environment—and it might seem decidedly unattainable.

The average interest rate for a 30-year fixed-rate mortgage is Tend to be above 7% for most of OctoberIt will more than double to 3.3% heading into 2022, according to Mortgage News Daily. Meanwhile, according to Realtor.com’s latest monthly report, the median US home price was $427,000 last month, up 13.9% from a year ago.

FA 100 details:

Here are the details for CNBC’s FA 100 list of Top Financial Advisory Firms for 2022:

However, the situation appears to be changing in favor of buyers in general. Demand continues to declineFaced with rising interest rates, median home prices have fallen month by month since hitting a record high of $449,000 in June, according to Realtor.com.

While it’s impossible to know for sure what house prices and mortgage rates will be in the coming months or years, make sure you’re in the best possible financial position to enter the market as a buyer. There is a way. road.

Here are some tips to help you prepare.

know how much home you can afford

“Think of no more than 25% to 28% of your total monthly income, including taxes and insurance,” said CFP’s Dean Kalash. BLB&B Advisor in Montgomeryville, Pennsylvania. The company ranked him 87th on CNBC’s FA 100 list.

The home-buying transaction itself also usually comes with costs such as mortgage fees and other closing costs such as transfer taxes and title inspection prices. These his one-time costs can add up to thousands of dollars.

You should also consider the ongoing costs associated with owning a home. maintenance and repair.

“Don’t let the house be rich and the cash poor,” Kalash said.

“Improve” your credit score

As you know, the higher your credit score, the lower the interest rates available for various loans, including your home loan.homebuyers with low credit scores You could pay about $104,000 more Zillow’s analysis outperforms those with excellent scores (based on a home value of about $354,200) over the lifetime of a 30-year fixed-rate mortgage.

“Look at your current credit score and see if you need to improve,” says Higgins.

Generally speaking, Score over 740 Bringing you the best mortgage interest rates. However, scores displayed for free online (so-called educational scores such as VantageScore) are Not typically used by lenders Under approval process.

Take a look at your current credit score and see if it needs improvement.

Sandy Higgins

Senior Wealth Advisor at Capstone Financial Advisors

Mortgage lenders draw scores from three major credit bureaus: Equifax, Experian and TransUnion, but they use specific FICO scores, which may differ from education scores.

anyway, financial habits such as paying bills on time and get rid of large credit card debt Help your score higher.

save a down payment

Another factor in calculating how much you can afford to buy is your down payment. This will help determine how much you need to take out a loan. The less you borrow, the less interest you’ll pay overall, and the lower your monthly mortgage payments. A bigger down payment can also help you get a better mortgage rate.

“We usually recommend putting in at least a 20% down payment to avoid private mortgage insurance,” Kalash said.

This type of insurance is meant to protect the lender in the event of default on the loan, and is typically applied to mortgages that are 80% or more of the home’s original purchase price. It costs 0.58% to 1.86% of the value of the loan.

If a 20% down payment seems out of reach, be aware that many home purchases are much less. According to the National Association of Realtors, first-time homebuyers pay an average of 7% down payment. For repeat customers, the average down payment is 17%.

“Keep an emergency stockpile”

Beyond things like property taxes and homeowners insurance, there are other costs that come with owning a home, such as paying maintenance and repair bills.those costs are easilygive me thousands of dollars back All at once.

Before you buy a home, make sure you have savings left over to cover any unexpected expenses or unexpected hits to your income or budget, says Higgins.

“We need to maintain an emergency stash,” she said. “The more you own a home, the more of these unforeseen circumstances arise.”

Financial advisors recommend having at least three to six months of income in your savings account to cover unexpected expenses.

You may also like