Time to reenter the market: Buyers, what do you need to know

Good news for buyer friends is here. According to data from Redfin and California Association of Realtors, bidding war reached its LOWEST level in August since 2020. Housing inventory continues to improve, with the highest level of active listings in nearly a year. Meanwhile, the interest rate is expected to stay low. This fall can be the best time for buyer to reenter the market. I imagine that you are excited to view more home options and too anxious to wonder if your offer can lead to a successful purchase. Let's put excitement and nerve aside. What else should you expect during the home purchase process?

While home search engines such as Zillow, Redfin, Trulia show you homes at your fingertips and tell you what the monthly housing cost can be, over 40% of home buyers are still not familiar with the cost associated with buying a home, AKA closing cost. Many home buyers only hear about closing cost when they are in escrow, meaning in transaction to finish buying the home they want. Closing cost is not a small number and it's important to understand it before you purchase the home. One main component of your closing cost is your first-month's monthly housing payment. Depending on the loan you take on, it can be just the principle and the interest payment of your mortgage, for example, a conventional loan with 20% down payment from you; or it can be principle, interest of the mortgage payment plus mortgage insurance if your down payment is less than 20%, prorated monthly home insurance payment, and monthly property tax payment. That's the key reason why the closing cost feels a lot. Yet you won't need to worry about housing payment for the first FULL month after you move in your new home. Two other major components are escrow fee and lending fee. To understand the details to the closing cost number and if you can negotiate some of the fees, you can have a conversation with your loan officer. I usually recommend to estimate around 2% of loan amount (NOT the purchase price) as the closing cost. For example, you are buying a $800,000 home with a $720,000 loan, your closing cost is around $14,400, 2% of the $720,000 loan amount.

Even though home buyers understand the significance of consistent income and the credit score/credit history when they apply for a mortgage loan, it is also essential to know the importance of maintaining the credit score/credit history and the consistent income when you are in the middle of the transaction so you can finish buying the home. Some of us know not to take on new debt such as getting a new car with a new car loan (or a boat) or quit your current work. You also want to avoid a few other things such as increasing your credit card balance, open new credit cards or new lines of credit, and change career that will not match your current income. So don't start shopping for that new sectional just yet.

Any other questions or concerns when you start to build your home ownership and real estate portfolio? Feel free to leave a comment or get in touch with me. Otherwise, happy home hunting!