Overcoming homebuying challenges in today’s market
So, you want to buy a home? But aren’t quite sure you’re ready to make it happen? You’re not alone. As a culture, we’re moving away from the white picket fence, but the American Dream still reigns—people still want a place to call their own—a place that’s truly theirs.
Buyers face many uncertainties. But for those who are ready to buy, challenges unique to the current housing climate are causing people to stay put. Below we’ll help you clear the hurdles and get into a new home.
Do you already know that you want to get pre-approved for a mortgage loan? Show sellers and agents that you’re ready to buy now with PowerBid Approval from Guaranteed Rate.
Hurdle #1: Low inventory
This can be chalked up to a mix of baby boomers who aren’t selling, a decline in construction workers, and high-priced construction—all causing a domino effect. A Freddie Mac pricing report states, “[Baby boomers] have been slower than previous generations to sell the family home, thus exacerbating the shortage of homes for sale.” Meanwhile, the foreclosure crisis caused millions of single-family homes to be converted to rentals. There just aren’t as many homes on the market.
But if baby boomers are going to move, they’re probably going to downsize, and that’s where we’re really seeing a shortage in homes. So, they’re not selling because they’re not seeing what they want on the market.
And that brings us to…
Hurdle #2: Lack of affordability
Economic experts have been continually calling for construction. The National Association of Realtors’ (NAR) chief economist Lawrence Yun explains, “Sales are up, but inventory numbers remain low and are thereby pushing up home prices. Homebuilders need to ramp up new housing, as the failure to increase construction will put home prices in danger of increasing at a faster pace than income.”
To meet housing demands, Yun specifies it’s not just more home building that’s needed—it’s more affordable home building. The majority of new construction going up is expensive. For example, in the first 10 months of 2019, there were approximately 585,000 newly constructed homes sold, while 56 percent of them were $300,000 and above.
In the meantime, what can you do?
- Get pre-approved: In a competitive market like this, a pre-approval can give you a boost right off the bat. Have your pre-approval in-hand before you even start searching for a home.
- Consider a renovation loan: If all the homes that seem to be in tip-top-shape are out of your price-range, don’t overlook some of those fixer-uppers. Renovation loans can give you the opportunity to take something that’s not selling, or selling for significantly less, and make it your own.
Hurdle #3: Financing
Saving for a down payment while simultaneously paying for your current housing can seem like an impossible task—particularly for Millennial first-time homebuyers who have yet to build up equity and are often riddled with student loan debt.
But long gone are the days of 20 percent down or nothing. There are conventional loan options requiring as little as 5 percent down, FHA loan options with only 3.5 percent down required, as well as a handful of down payment assistance programs to look into.
When you put down less than 20 percent, you’ll need to factor in Private Mortgage Insurance (PMI), but after building up equity (once you’ve built up an 80 percent loan-to-value), you’ll have the option to refinance and eliminate your PMI.
Hurdle #4: Time
When your in a competitive bidding situation, you may find that you have to move fast to get ahead of other bidders, especially those with an all-cash offer. When that happens, you don't want your lender to slow you down. That's why Guaranteed Rate offers Same Day Mortgage. You can get a loan approval in as little as one day, with options as little as 3% down. This will help your offer stand out, make it easier to line up dates with the seller, and get you to the closing table faster.
Hurdle #5: Higher mortgage rates
Mortgage rates in 2023 aren't anywhere near their all-time high, though it can feel like it when we remember that they were at a historical low just two years ago. For those who are getting rate quotes that are higher than you'd like, you do have options, like Rate Reduce temporary buydowns from Guaranteed Rate. This option allows you to keep your payments low for the first year or two of your loan thanks to an upfront deposit from sellers or builder partners. They are essentially “buying down” your mortgage rate for a specified period of time. Another option is paying points, which works similarly to Rate Reduce, but you'd be the one paying down the rate at closing.
Whether you’re self-employed or you’re worried about a less-than-perfect credit score, there are options. Lay it all out there for a knowledgeable loan officer and they might be able to find you something you didn’t realize was possible.
Clear the first hurdle: Get Pre-Approved with PowerBid from Guaranteed Rate
PowerBid Approval (the “Approval”) is contingent upon receipt of executed sales contract, an acceptable appraisal supporting value, valid hazard insurance policy, and a re-review of your financial condition. Guaranteed Rate, Inc. reserves the right to revoke this Approval at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation and/or if any information contained your application is untrue, incomplete or inaccurate. Receipt of an application does not represent an approval for financing or interest rate guarantee. Not all applicants will be approved for financing. Restrictions may apply, contact Guaranteed Rate for current rates and for more information.
Guaranteed Rate's Same Day Mortgage promotion offers qualified customers who provide certain required financial information/documentation to Guaranteed Rate within 24 hours of locking a rate on a mortgage loan the opportunity to receive a loan approval within 1 business day of timely submission of documentation and does not suggest that the borrower will receive funding on the same day as their application submission. For purposes of this offer, documents provided after 1 pm local time or on a weekend or company holiday will be deemed submitted the next business day. Guaranteed Rate cannot guarantee that a loan will be approved or that a closing will occur within a specific timeframe. Guaranteed Rate reserves the right to revoke this approval at any time if there is a change in your financial condition or credit history which would impair your ability to repay this obligation. Read and understand your Loan Commitment before waiving any mortgage contingencies. Borrower documentation and Intent to Proceed must be signed within 24 business hours of receipt. Not eligible for all loan types or residence types. Minimum down payment requirements apply. Self-employed borrowers are not eligible. Not all borrowers will be approved. Borrower's interest rate will depend upon the specific characteristics of borrower's loan transaction, credit profile and other criteria. Not available in all states. Restrictions apply. Visit rate.com/same-day-mortgage for terms and conditions.
Rate Reduce available from participating builders and sellers on select properties.