Have you been contemplating buying a home? But you don’t know where to start. This article will help give you tips for buying a home in 2022.
Whether you are a first-time home buyer or moving up to your dream home, these tips will help you in buying a home.
I’ve been working in this industry for over 20 years. I have seen every type of market. These 5 tips will help you buy a home in any type of market conditions.
The most important Tips for Buying a home in 2022 will include:
- Finances
- Mortgage Pre-Approval
- Select a Realtor
- Manage your Expectations
- Patience
To get started in this process, you will need to follow these steps in order. Be sure to take your time and don’t skip any steps.
Finances
Get your finances in order. This is your first tip for buying a home in 2022. This is so important. Do not skip past this step. But what does it mean?
Now is the time to assess your income and debt. Do you have any loans? This could be student loans, car loans, medical bills, or credit cards. Do you have any bad debt? Lenders do not want to see late or unpaid bills. This will affect you buying a home. This is why I recommend getting your finances in order first.
Do you know your credit score? This is very important when it comes to your financing and interest rates. Most lenders want to see a credit score over 620. The higher the score, the better your terms.
What type of savings do you have? How much do you have allocated to your down payment? Where is your down payment coming from? A lender needs to see the source of this money. If you will be receiving a down payment gift from a family member, you will need to prove that it’s not a loan.
Also, do you have stable income for the past 2 years. This is very important to all lenders. Lenders want to see that you have a stable work history. This proves that you are capable of paying a mortgage.
Lastly, now is NOT the time to buy anything. And I mean anything!! Mortgage lenders don’t want you adding to your debt. So…no new cars or furniture. You can buy all that after you close on a home.
Once you have done all the above, you can move on to the next step. This step may take you a while, especially if you have items to clear up on your credit. The better your credit score, the better your terms.
Mortgage Pre-Approval
The next tip for buying a home in 2022 is getting yourself pre-approved for a loan. Now that you have gotten your finances in order, you are ready to meet with a mortgage lender. This tip is so important. You need this in order to make offers on any home.
This is when your lender will review your credit score. They will also gather information about your income. This can come from your job or any source of stable income. You need to be able to prove your income. If you didn’t claim it on your taxes, then it isn’t valid to a lender.
They will also assess your debt to income ratio (DTI). DTI compares how much you owe each month to how much you earn. It’s the percentage of your gross monthly income (before taxes) that goes toward your outgoing debt (loans, rent, etc.). Most lenders will allow your mortgage to be a maximum of 28% of your gross income and total debt cannot exceed 36%. This is why the first step of buying a home is getting your finances in order.
Your lender will also ask you how much you want to put towards your down payment. A good lender will go over all the different types of loans. There are a variety of different types of loans. They are fixed-rate loans, jumbo loans, adjustable-rate loans, FHA loans, and VA loans. Each loan has different qualifications and down payment requirements. Be sure to check out my blog post about the different types of mortgages.
After your lender has run these numbers, they will give you a pre-approval letter. This letter will include the purchase price (max amount you can spend), down payment amount, and expiration date. Most sellers will ask for this letter with any offers to buy that you submit.
The lender will give you an estimate of how much your monthly payment will be. The monthly payment may include principal and interest, escrows (tax and insurance), and PMI. PMI stands for private mortgage insurance. This type of insurance is included by lenders if you do not put down 20% on the home. This insurance protects the lender, not you, if you stop making payments on the loan. They will also give the terms of the loan.
The terms of a loan are the length of the loan and the interest rate. This is also why you need to pay attention to the expiration date. Be sure to have your letter updated once it expires. Your buying power will decrease every time interest rates increase.
There are numerous items that you need to have ready for a mortgage lender. This article should help you understand all the items they want and why.
Find a Realtor
The next tip for buying a home is finding a realtor. Yes, I used to be a realtor, and I recommend working with a realtor. They are the expert. They have the experience to get you from start to finish.
Be sure to check out my blog post about reasons for hiring a realtor.
A realtor will work with you to find the right house. In this type of market, now is not the time to find a house on your own. They will find a property that fits your qualifications. They will negotiate a contract based on a market analysis of the home and area. They will also coordinate inspections, recommend attorneys, and more. The best part about using a realtor is the seller is usually paying their commission.
Manage your Expectations
There is limited inventory in this market. Be sure to manage your expectations. You will need to be flexible in your wants. You need to determine what amenities you need and what amenities can live without. I still feel like the most important feature of buying a home is location, location, location. Find a home in your price range in the best location. Cosmetic items can be changed, but the location is permanent.
I can’t tell you how important it is to work with a realtor. Check out this article to help you find the right realtor.
Patience
And my final tip for buying a home is patience. Finding the right house in this market is going to take time. You will most likely not get the first home you make an offer on. This could take weeks or months, but eventually you will be closed on your home.
Now that you have read my 5 Tips for buying a home in 2022, don’t be in a hurry. Be sure to follow the steps, in order, to get started on your home buying journey. Good Luck!
