Many neighborhoods are bound to be packed with cars on Feb. 12, as families, friends and fans gather to watch the Super Bowl. But cars may line up around the block the next day for an entirely different reason — open houses.
Trading foam fingers for rubber cleaning gloves, homeowners across the country will get ready to list their homes for sale. The day after the Super Bowl is considered by many in the industry to be the unofficial start of the homebuying season.
Consider a market like Massachusetts, which has a strong sports culture and cold winter months. Kristin Coppola of South Shore Sotheby’s International Realty in Duxbury, Massachusetts, has explicitly recommended that sellers hold off listing until after the big game. “It’s the New England mentality,” she says, as locals are in “hibernation” while they focus on the football season. Once the game is over, however, all bets are off. “It’s like a madhouse.”
As the 2023 NFL season comes to an end and the homebuying season begins, use this guidance to shop like a pro.
Focus on costs and affordability
Thanks to interest rates that are higher than they were last year, home buyers are getting less for their dollar. Competition may not be as fierce as it was during pandemic highs, but many home shoppers are now contending with tightened budgets. Those financial constraints limit the number of homes buyers can afford in an already shallow pool of inventory.
You should understand the full costs of homeownership, as well as how to position yourself as an attractive borrower to lenders and sellers.
A stronger borrower profile = better rates
Before you even begin browsing online listings, take a long look at your own finances.
A good place to start is your credit score, as lenders will typically want to see a score of at least 620. The best mortgage rates are reserved for borrowers with scores of 740 or higher. A lower rate will free up more of your monthly payment to go toward the principal, meaning that you could afford a home with a higher sticker price.
One fast way to help your credit score is to request a free credit report and dispute any errors. The credit bureaus have up to 45 days to investigate and respond to your claims.
You’ll also want to consider your debt-to-income ratio, as this is one of the major elements that lenders consider when reviewing your loan application. Borrowers whose total debts account for more than 36% of their monthly income will find it difficult to qualify for the best rates.
Develop a realistic budget
The median home purchase price in December 2022 was $366,900, according to the National Association of Realtors. Beyond the price of the home, you’ll want to factor in the additional costs of homeownership. These include property taxes, utilities and homeowners insurance, as well as the general costs of maintaining a home, such as upgrading appliances or replacing the water heater. If you’re buying in a neighborhood with a homeowners association, factor in those fees as well. You’ll also need to account for closing costs, which are typically 2% to 6% of the loan amount.
Don’t stretch your budget beyond what you can safely afford; instead, turn to your list of criteria and start making cuts where possible. That ideal 36% debt-to-income ratio includes your home loan. Calculating your existing monthly debts can give you a sense of how much of your remaining income you can comfortably use for mortgage payments.
Get preapproved for a mortgage
Buyers “need to be prepared to hit the ground running” to take full advantage of the seasonal spike in available homes, says Coppola. New listings in her market tend to peter out by Memorial Day, when locals head to the beach. One way to prepare is to start reaching out to lenders to get preapproved for a mortgage.
Mortgage preapproval will benefit you in a number of ways during your home search. It gives you peace of mind by confirming that you can qualify for a loan; it can help inform your budget; and, when you’re ready to make an offer, it will demonstrate that you’re serious and motivated to buy.
“A preapproval letter sends a clear message to sellers that these are strong buyers,” says Jessica Schenkel of Sagan Harborside Sotheby’s International Realty in Swampscott, Massachusetts.
Shop around and apply for mortgage preapproval from multiple lenders. This allows you to compare rate offers, as well as any associated fees.
Build your winning team
“An important play is finding a Realtor who will represent your best interests in one of the biggest and most important purchases you will ever make,” says Schenkel. “Not everyone will be a perfect fit.” Your agent will be an informed insider resource who can help you understand your particular market, including the challenges and competition you may face and where to look for homes within your budget.
Taylor Getler writes for NerdWallet.
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