Thinking about buying a new home in 2023?
First, the bad news: Affordability remains a serious challenge for most buyers, said George Ratiu, director of economic research at realtor.com.
“Prices are on average 10 percent higher than a year ago, and mortgage rates are 100 percent higher than they were a year ago,” he said. advance, or add $800 to $1000 to the monthly payment.”
Now, there’s good news: Inventory is up, so there are more homes to choose from and therefore less competition, Ratiu said. Also, homes are sitting on the market a little longer.
“That is putting downward pressure on prices and giving buyers more bargaining power,” he said.
That doesn’t mean shoppers will find bargains in 2023, but the shopping experience will be less frenetic and more orderly this year, Ratiu said. “It won’t be like the market we saw last year or the year before. We are looking at a much more ‘balanced’ market in 2023,” he said.
But you still have to do your prep work. This is a checklist.
Put your financial house in order
“Wipe it off Rick Sharga, executive vice president of market intelligence at ATOM, a leading provider of real estate and property data. “It will also improve your credit score, making you eligible for the best mortgage rates.”
Sharga says lenders want mortgage payments, insurance and taxes to account for no more than 28% to 33% of borrowers’ monthly income (although in higher-cost states, this percentage often higher than 40%), says Sharga.
“They will also look at the non-residential debt a borrower is carrying to determine how large the loan is,” he said, “or whether a loan should be made.”
Get your finances on the spot
After you have an idea of how big the monthly payment is that you can comfortably handle and have a sense of what you are looking for (what you need/want in a home in terms of location). location, size, style, etc.), start shopping for a mortgage lender. Find someone who will pre-approve you a loan.
“This will allow you to move forward faster when it comes to finding properties that interest you and gives you a competitive edge over other potential buyers,” says Sharga. “Shopping for a general loan also helps secure better interest rates and loan terms than just applying to one lender.”
Calculate all costs
Do you know what homeowner’s insurance – required for most mortgages – what these costs mean? A lot of.
“California wildfires, hurricanes in Florida and other extreme weather across the country have sent insurance premiums skyrocketing,” said Sharga.
Other costs that are often overlooked — especially for first-time buyers — include property taxes and HOA fees, which can add hundreds of dollars to the monthly cost of homeownership.
Mitch Roschelle, founding partner of Macro Trend Advisor.
Ready to commit
For most buyers, a home is a long-term financial commitment, so make sure you’re comfortable not only with the community you’re buying from but also with your job, says Ratiu.
“Make sure it’s safe and you have enough money at the end [buying] the process is saved so that if you lose your job, you won’t have a problem,” he said.
Also, make sure you plan to live in the house for at least 3 to 5 years as transaction costs are significant, ranging from 4% or more of the cost of the home, Ratiu says. .
“A $500,000 home can be $25,000 in fees and other expenses,” he said. So if you’re just going to stay there for a year and then sell it, be aware of these costs.”
Personal finance journalist Vera Gibbons is a former employee of SmartMoney magazine and a former reporter for Kiplinger’s Personal Finance. Vera, who spent over a decade as an online financial analyst for MSNBC, is currently the co-host of the weekly non-political news podcast she founded, NoPo. She lives in Palm Beach, Florida.
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