For some home buyers, conditions have become much more buyer-friendly than we’ve seen in several years. Less competition means home shoppers now have more time to consider their options to make sure they find the best fit. They also have less chance of getting caught up in a bidding war. But even more importantly, it’s taking more time for homeowners to sell their homes. And that’s potentially good news for homebuyers, who now have more room to negotiate.
Homes will eventually sell, but it may take a few months, and sellers need to meet buyers where they are. That means lower prices and more balanced negotiations, including potentially giving buyers a credit to buy down their mortgage rate and paying for home repairs.
Current homes are on the market for 34 days, a full week longer than a year ago. It’s also a big change from May this year, when homes were sold in 17 days on average.
Owning a home in Marin County is synonymous with building wealth, and if you are thinking of jumping into home ownership for the first time, the sooner you take the plunge, the more equity you are building in your future.
Before taking this very serious plunge, however, there are a few things to consider. I’ve come up with 5 questions I encourage my clients to ask themselves:
1. How is your credit? Are you rocking a 820 credit score or scraping by with a 620? Take the time to clean up any lender errors, fraud issues and talk to your banker about what you can do to be more attractive to lenders.
2. What’s your debt to income ratio. Evidence from studies of mortgage loans suggest that borrowers with a higher debt-to-income ratio are more likely to run into trouble making monthly payments. The 43% debt-to-income ratio is important because, in most cases, that is the highest ratio a borrower can have and still get a Qualified Mortgage.
3. What can you afford? Of course, this will most likely be the single largest investment you’ve ever made. And I’m not just talking about the down payment you’ll need to finance the home which in the Marin market is commonly is 10–20%, but also consider the closing costs, insurance, property taxes, etc. And while the Federal Housing Administration (FHA) Mortgage has a minimum down payment of only 3.5% and is available to all qualified buyers, regardless of income level, talk with your lender about what amount makes the most sense in order to get a better mortgage rate and lower monthly payment.
4. Are you ready to settle down? Does your job or business look stable? If you are buying with another person or family member, is your relationship strong enough to weather the highs and lows that come with life? Are they financially stable? Do you both see this as either a short or long term investment? Have you discussed how you would handle a potential buyout, if necessary?
5. Can You Fix a Leak? You can’t simply call the landlord; as a homeowner, you need to have the skill to fix problems yourself or the resources to pay others to fix them.
Now that you’ve addressed these questions, I fully encourage you to pursue homeownership, if it’s right for you. I am a big believer in real estate investing as soon as you are ready and your lifestyle permits. If you were not able to answer yes to these five questions – that’s okay! It just means the timing is not right – right now. Building a relationship with a Real Estate Agent is also an important step toward home ownership. I’ll be ready to help you when the time is right, and I'm here to answer any questions you have at [email protected] or call 415-910-0599.
