Let’s get ready to rumble.
- Get yourself in the best possible financial position to buy by paying down debt, saving a down payment, and increasing your income if possible.
- Go for a conventional mortgage if you can qualify for one.
- Mortgage pre-approval is your friend, and so is being looser with your inspection contingency in a home offer.
While the housing market has been cooling off a little as of late, it’s not a great time to be a home buyer. In addition to higher mortgage rates and not enough housing supply to meet demand, buyers also have to contend with real estate investors, who buy houses in cash and often beat out buyers who have to rely on financing with a mortgage.
Investors bought a record 18.4% of homes sold in the U.S. during the fourth quarter of 2021, according to Redfin. This number is up 12.6% from just a year earlier. Needless to say, wannabe home buyers have to do a bit more legwork to compete for what houses are available. I’m hoping to become a homeowner again myself in the next few years, and if I end up facing the same kind of market, I’ll be going into it with eyes wide open, and with the following tips in my back pocket.
Position yourself to buy
This is the place I’m in right now. If you’re intending to buy in the near future, it pays to set yourself up for success by paying down your debts, increasing your income if possible, and getting your financial house (ha!) in order. Paying down debt and getting a firmer handle on your finances will likely also result in a higher credit score, which will in turn make it easier for you to qualify for a mortgage when you decide to buy a house.
You should also be saving for a robust down payment. In fact, 20% down is recommended, because that way you’ll avoid having to pay private mortgage insurance on a conventional loan (which is one of the pillars of this plan to beat investors, as I’ll discuss further below).
Target a conventional mortgage, if you can qualify
When the time is right, you’ll need to shop around with a few mortgage lenders to see what kind of rate and mortgage you can qualify for. Government-backed mortgages (such as FHA loans, which are guaranteed by the Department of Housing …….