Homebuying Do’s and Don’ts in Today’s Market

While headlines highlighting rising mortgage rates and dwindling inventory have prompted some to push “pause” on their home ownership plans, the fact is, that now is still a good time to buy.

Why? Investing in the roof over your head is never a bad thing. Homeownership is the best inflation fighter, especially here in the Pacific Northwest, where home values are unlikely to drop anytime soon.

Limited inventory has also kept prices stable even as rates have risen, and waiting for rates to drop doesn’t guarantee an easier path, given that home prices could rise as rates go down.

And the reality is, today’s rates remain significantly lower than during much of the past 40 years that I’ve been helping people realize their dream of home ownership. With rates ranging from 2 to 18 percent over that time, we can characterize the current borrowing rates of 5 to 7 percent as a “normal market.”

So, what can you do to set down roots in a new home? Here are some of the best practices I share with prospective buyers, beginning with a list of your questions to explore with your local lender. After all, the most intimidating thing is the unknown!

1. First, accumulate your down payment – the larger the better. While aiming for a 20 percent down payment is ideal, with single-family homes in Snohomish County starting in the $500,000 range, it’s not always doable or necessary for first-time home buyers. Alternatively, Zero Down programs can work well for that first purchase, but if you can access a down payment of at least 3 percent, you’ll have even more options. Common sources of down payment funds include a gift from relatives or the sale of assets, like a car, boat, or other valuable items. You might also draw from savings or secured borrowings, such as a 401k loan. Current homeowners can also look into a bridge loan or use equity in your current home with a Home Equity Line of Credit (HELOC).
2. Next, assemble the financial documents to get pre-approved for a loan. The last thing you want is to find the home of your dreams, and then not get approved for financing. Understanding the difference between pre-qualifying and pre-approval is key. While “pre-qualifying” is based on a cursory review, pre-approval is a more formal process in underwriting that helps to ensure financing up to a specified amount for a set period.
3. Finally, when it comes time to provide your earnest money deposit, it’s essential to use your own funds. If parents are helping with the deposit, for example, they should send it to you first, so the deposit comes from your account. If you’ve sold a car or a boat to raise the cash, keep the bill of sale to identify the source of revenue.

With our “Do’s” out of the way, what are some of the “Don’ts” to keep in mind?

1. Don’t take on significant expenses that could affect your credit. This includes taking out a loan for a new car or making other large purchases.
2. Avoid making big lifestyle changes, such as getting a new job. Lenders like to see stability when evaluating applications and assessing risk.
3. Finally, don’t be intimidated by the process. A home purchase is a big decision with many components, but working with an experienced loan officer you trust, who is familiar with both you and your community, will make the entire process easier to navigate.

One of the key advantages of partnering with a local community bank is our close connection to the market we serve. Our lenders live and work right here, giving us a deep understanding of the local market and your unique needs. We also appreciate the stability that homeownership brings to the community. With the right partners by your side, now is an excellent time to explore opportunities in the housing market and find the house of your dreams.