How to Buy a Home in 2023
Two major challenges in the real estate market for buyers right now are high mortgage rates and low inventory. Let’s take a look at some solutions.
The challenge: High mortgage rates
It’s no secret that mortgage rates are high right now. It’s one of the main challenges for buyers in 2023. A high interest rate makes your monthly payment much higher even when the price of the home hasn’t changed, and it doesn’t look like rates are coming down any time soon. If high rates are a problem for you, try these solutions.
Solution #1: Purchase a home with an assumable mortgage
An assumable mortgage is a home loan that can be transferred from the original borrower to the next homeowner, and the interest rate stays the same. This means that a buyer could potentially save a significant amount of money on their monthly mortgage payments by assuming a mortgage with an interest rate much lower than the current available rate.
Are all mortgages assumable? Not quite. Most conventional mortgages aren’t assumable, but many government-backed loans are. There are certain limitations that apply to taking over someone’s mortgage, and you’ll have to look into each case individually.
How do you find a home with an assumable mortgage? Ask your real estate agent. With the market the way that it is, many sellers with the ability to offer this option are listing it as a selling point—just like a big yard or a chef’s kitchen. If this is something you’re interested in, get in touch with your real estate agent and let them know.
Solution #2: Buy now and refinance later
If you can afford the higher payment, it can be a better choice to buy a home now and refinance when rates drop. Why? There are a couple reasons. First, real estate values rise and fall in the short term, but they always appreciate in the long run. So while you’re waiting for mortgage rates to drop, you’re actually allowing prices to go up. That home you have your eye on now could be much more expensive if you keep waiting.
Secondly, if you buy now, you’ll start building equity. When you do that, you benefit from rising home values instead of struggling with prices that feel unattainable down the road.
Finally, there’s no major interest rate drop on the horizon. While rates may stop rising or fluctuate slightly, a huge crash isn’t in the predictions of any major economic or real estate expert. Continuing to wait could put your homebuying dreams on hold for a long time, whereas if you buy now, you can always refinance when interest rates eventually drop in the future.
The challenge: Low inventory
The number of homes available on the market is referred to as “inventory.” Due to a variety of factors (and because many homeowners don’t want to give up their low interest rates), most of the country is in a low inventory market. That means that even with reduced buyer demand, there are still more buyers looking for a home than there are homes available. What does that mean? It means that prices stay high, and buyers struggle to find a property that meets their needs. If that’s what you’re dealing with, check out these solutions.
Solution #1: Work with an expert real estate agent
The best real estate agents have more than a list of homes at their disposal. They have deep local knowledge, an extensive network of connections, and a repertoire of techniques to find you exactly the home you’re looking for. Searching on your own or just picking any agent who pops up on a search engine won’t be as effective as making a careful selection. Check out a real estate agent’s website, their Google reviews, and their track record. Then have a chat with them about your hopes and expectations to see if it’s a good fit.
Solution #2: Tap your network
Still not finding the home you’re looking for? Start asking around. It sounds simple, but putting out feelers can help you find a home to buy much faster than spending hours on Zillow. Talk to friends, family, coworkers, and acquaintances, and let them know you’re in the market. If anyone knows anyone looking to sell, they’re likely to put you in touch. And research shows that people like to do business with people they know—so you might end up with the home of your dreams faster than you expected.
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