The world of Real Estate changes every year, so what you knew before may not be what you should know now.
If you are planning on taking the plunge and buying your first home this year, or even your second or third, read further to learn some pointers about buying in the 2020 housing market.
Your first step
Always, always, always make sure you get pre-approved for a mortgage before home shopping. The market is more competitive than ever this year and a pre-approval letter gives you great negotiating power versus an offer without one.
By getting pre-approved, you can also get an idea of how much house you can afford. This helps eliminate any roadblocks along the way.
A great way to figure out how much house you can afford is to take your income, times three, and that will give you an idea of your price range.
For example, if you make $45,000 annually and your spouse makes $50,000, your combined income is $95,000. Three times that income will put you in the $285,000 ballpark.
Evaluating your credit score
The minimum credit score you will typically see required by lenders is 620. Keep in mind, not all lenders look at the same credit score you do, and many factors can vary what affects a credit score. However, your FICO score is a great place to start in order to get an idea of where you are at.
2020 mortgage rate trends
In 2020, mortgage rates have managed to lower to an average of 3.45% APR. The last time the 30-year fixed-rate mortgage was at or below this level was in October 2016, when it averaged 3.42%. Additionally, these rates aren’t expected to budge much in 2020.
Down payments
In 2019, the median down payment homebuyers used to finance their home purchase was 6% down. This is quite a big difference from the 20% down that many think is normally required. In fact, down payments have been repeatedly seen at as low as 3% down in 2019, and this trend is expected to lead into 2020 as well.
However, the market is getting increasingly competitive as more and more homebuyers enter the game. Seller inventory may have a hard time catching up with buyer demand, so the larger down payment you can make, the better.
Home prices
Here is the kicker: home prices are still rising slowly at 3.3 %. It is predicted that these prices will continue to rise in 2020 but at 2.8%. Growth isn’t projected to be as rapid as in previous years, but it just goes to show how seriously you should be considering the current housing market if you are on the fence about making your first home purchase.
