State of the mortgage market: Here’s what to know if you’re ready to buy a new home
It’s no secret that spring is prime home-buying time. The state of the mortgage market fluctuates all year, but as we move further into 2024, the market’s current conditions provide unique opportunities for those looking to buy a home.
2024 market conditions
The start of the spring homebuying season saw interest rates for a 30-year term in the mid 6%. These rates may seem high compared to the ultra-lows we saw in 2020-2021 but are still relatively low when you look at overall historical rates. Interest rates are expected to drop as the market loosens up with more inventory.
Currently, we’re in a unique market where home prices are more of the barrier to potential homebuyers than the interest rates.
Much of 2023 was a seller’s market, meaning sellers had the advantage in the transaction. This was because buyers outnumbered sellers in the market. Now that we’re into 2024, determining whether you’re shopping in a seller’s market or a buyer’s market can depend on the price range you are shopping in.
For price ranges up to $400,000, you may still be in a seller’s market and you’ll have to be competitive with your offer. Many first-time homebuyers may find themselves in a multiple-offer situation. Work with your Realtor to be creative with your offer. This may include offering at or above asking price, waiving inspections and offering flexible close dates for the sellers. Just be sure you understand the pros and cons of your offer by discussing with your real estate agent and lender.
For price ranges above $400,000, the market is trending more in the buyer’s favor. In a buyer’s market, typically sellers will drop their asking prices to gain an advantage. Competition has relaxed and you are more likely to be able to negotiate or take advantage of incentives offered by the seller.
If you’re looking at building a new home, builders are not dropping prices, but they are offering incentives such as builder upgrades or buy-downs, which is a way for a you to obtain a lower interest rate by the builder paying discount points at closing.
How to be the most qualified buyer
Apply for prequalification or preapproval: In this competitive landscape, it’s important to understand the difference between getting prequalified and preapproved. A prequalified buyer submits a credit application to the lender who then runs their application through an automated underwriting system to get the initial approval.
A preapproval takes that step further and requires the buyer submit credit, income and asset documentation for review by an underwriter. A preapproval indicates to the sellers that you are a committed homebuyer and that you have gone through every possible step in the process before going under contract. Taking this extra step can give you a leg up on your offer.
Do your research: Make a list of your must-haves you want in a home to help narrow down your home search options. Hiring an experienced real estate agent who understands the local market and has great negotiation skills can give you an edge over the competition.
Optimize your credit worthiness: The higher your credit score, the more mortgage loan options you have available to you. Plus, you’ll also qualify for a lower interest rate which will save you money on interest costs over the life of the loan. There are things you can do to boost your credit score: make your payments in full and on time, only use up to 30% of the credit on your revolving accounts like credit cards and don’t open new credit unless absolutely needed.
Seek professional guidance: At CommunityAmerica, a team of mortgage advisors are local, so they have a pulse on the local housing market trends. If you have questions about your mortgage options, interest rates or the best way to get started, call 913-905-3799 or schedule an appointment online.
