After a nine percent increase in median home prices since last year, many California homebuyers are discouraged by the idea of saving for a home. In fact, a study by Redfin found that 50% of millennial homebuyers’ top concern is having enough money for a down payment.
Other concerns included affordability in a desirable location (45%), rising home prices (41%), and increased competition for bidding wars (28%). These concerns along with the inflated market have led over 65 percent of millennials to seek out a secondary income.
Even though the average home in Sacramento typically sells for just over the list price, the typical down payment is still almost 26 percent.
With competition increasing and prices rising, how can you improve your chances of submitting a winning offer? And more importantly, what financial tips can give millennials an advantage when searching for homes?
Here are a few tips to ensure you find the right home at a manageable price:
Get Pre-Qualified For a Mortgage
Unless you’re paying entirely in cash, get prequalified for a mortgage before you start looking at homes. You can usually do this over the phone or online and your mortgage broker will take a look at your finances and credit history to determine how large of a loan you qualify for and what your mortgage rate will be based on your down payment.
At the same time, however, don’t assume that you’ll be able to afford a more expensive home than you initially thought just because you qualified for a larger loan than you expected. Keep a close eye on the monthly mortgage payment. If you can’t afford that, then you can’t afford the home. This step will set your budget and help define the parameters for your house hunt.
Once you know your budget you’ll be prepared to act quickly and decisively to quickly snatch up the house once you find it.
Consider the Closing Costs
Don’t forget about taxes, closing costs, property insurance, and other after-the-sale expenses. The home itself isn’t the only thing you’ll be paying for during the home buying process so be sure to keep those other costs in mind and factor them into your budget.
Figure out the home insurance and property tax rates in your state and calculate your closing costs before you get started so that you can incorporate those fees into your budget. It could be a good idea to get your home insurance through the same company that covers your car as many insurance companies offer lower rates for bundling the two.
First-Time Homebuyer Programs
It's easy to get overwhelmed by all the numbers, but keep in mind there are a lot of great first-time homebuyer programs that can help with things like down payment assistance. Our mortgage team is here to help guide you through the homebuying process and find the best scenario for your financial and living situation. In fact, we invite you to join us at one of our free First-Time Homebuyer's Workshop to learn more about how to get started and some of the resources that are available.
Look To the Future
Be sure to consider what you need out of the house in the future and not just right now. Study the neighborhood and surrounding area to make sure that the neighborhood you’re looking at will work for you long term as well as right away. While that hip downtown neighborhood has great nightlife and restaurants, it may not have the best schools. This could be a problem if you’re deciding to raise children in the home.
Similarly, keep your potential return on invest (ROI) in mind when you’re house hunting. It’s easy to only look at the value of your potential first home as it is now but also take a look at the trend in the neighborhoods property values. Is your house in an up-and-coming neighborhood? The homes in some neighborhoods will appreciate at a faster rate than others, something that will come in very handy when you’re looking to upgrade a few years down the road.
Learn the Lingo
Learn all the real estate lingo. There are so many real estate-specific terms that it might as well be a new language. That is a language you’ll have to learn though if you want to have a clearer understanding of the home buying process and understand exactly what it is you’re paying for at various stages of the process.
Have a question? Give us a call at (800)455-0986 or request a quote today.
Restrictions may apply. You do not have to be a partner employee to receive the credits. The credit towards closing costs has no cash value and will be applied at the close of escrow. This is not a commitment to lend. Borrowers may not qualify for certain loan programs or for the full credit of $750. American Pacific Mortgage Corporation is licensed by the Department of Business Oversight under the CRMLA. NMLS #1850. The "Keys on Time" program is a limited guarantee that APMC will provide a closing cost credit of $895 if, due to some fault on
the part of APMC, its originators or other APMC staff, a purchase transaction does not close until a date after the originally stated close of escrow date. The "Keys on Time" limited guarantee does not apply if the purchase transaction fails to close on or before the anticipated close of escrow date due to events/circumstances beyond APMC's control, including but not limited to, delays caused by: an unacceptable or unexpectedly low appraisal value on the subject property, acts or omissions by the escrow or title company, second lien holder approvals, short sale approval, or loan conditions imposed by the lender that, despite reasonable diligence by APMC, are not met by any party in a timely manner. The "Keys on Time" limited guarantee trigger begins when the initial loan package is received by APMC's Fulfillment center The complete loan package must be received in the APMC
Fulfillment center a minimum of 18 days prior to the COE date. Exclusions: The limited guarantee does not apply to the HARP program, reverse mortgages, FHA 203k, USDA, non-delegated jumbo products or any loans that require prior approval from an investor. The limited guarantee applies to purchase transactions only and is not available in Oregon. All programs are subject to borrower and property qualifications. Rates, terms, and conditions are subject to change without notice.