Homebuying: Are You Ready to Take Advantage of Lower Prices?
Recently, I read on CNN Money that home prices are expected to fall again quite soon. The article pointed out that Fiserv expects that a triple dip in home prices will result in a drop of another 3.6% by June 2012, resulting in prices that are 35% below the peak hit early in 2006.
According to the article, persistent problems in the jobs market, more foreclosures, and the presence of “shadow inventory” are all likely to hinder home price recovery. This, of course, means that homebuyers may soon have access to some great opportunities. But, if you want to take advantage of these low prices, you have to be ready.
Are You in a Position to Buy a Home?
It’s true that buying a home isn’t for everyone. There are a number of people who feel that they are better off renting, rather tying themselves down to a mortgage. And that’s just fine. However, if you are interested in buying a home, whether it is meant to serve as your primary residence, or as a rental property, you do need to be ready. While lenders have loosened their lending standards somewhat from what they were just after the financial crisis of 2008, they are still tighter than what you would have seen in 2005 or 2006.
If you want to be ready to jump on an opportunity, you need to prepare in advance. Some of the things you can do now to get ready to buy a home include:
- Improve your credit rating: One of the best things you can do is make sure you have good credit. While it’s possible to qualify for a mortgage if you have a credit score below 700, it’s practically impossible to get the best interest rate without a good score. So, work on improving your credit rating.
- Pay down some of your debt: Paying down some of your debt will help you credit rating. It will also make you look more attractive to lenders, since you will be lowering your debt-to-income ratio.
- Save up for a down payment: You can get better loan terms, and show you’re serious, with the help of a down payment. Start saving up now for a down payment. The longer you have to save up, the better off you will be. A hefty down payment can be especially helpful if you are planning to look for homes at auctions and if you are looking to make deals with distressed sellers.
- Do your homework: Make sure you understand how much homes are going for right now, and that you understand what sort of neighborhood you are buying in. Be prepared by understanding location.
Also, realize that you might have stricter standards when you try to buy a home that is supposed to be used as a rental property. The lender will want to see that you can handle the payments, and that you have a plan for avoiding default. It can be much tougher to get a loan for a second home, or a rental home. Make sure you prepare accordingly, and give yourself plenty of time to get in a position to buy.