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Source: MSN — 

Buying a home is an integral part of the American dream. There’s something special — almost sacred — about the idea of owning your own property where you can raise kids and grow old with your spouse before passing on that property to your descendants.

The trouble is, buying a house is fairly complicated, particularly in the modern market. Let’s break down how to buy a house in 2023 step-by-step.

Step 1: Do tons of research and figure out your financials

As a first-time homebuyer in 2023, your first priority should be to do a lot of research. Buying a home may be the most expensive purchase you’ll ever make in your life, so it will be in your best interest (both personally and financially) to pick the perfect home and area and to consider your financials carefully before pulling the proverbial trigger.

Specifically, you should determine:

  • What kind of home do you want in terms of its square footage, features, inclusions, etc.
  • Where do you want to buy a home. Generally, homes in suburban areas or metropolitan areas are more expensive. Prices can also increase given factors like proximity to good schools, whether or not the home is in a good neighborhood, etc.

Figure out the kind of home you want to buy and where you want to purchase a property before going any further. Don’t start home shopping without establishing your non-negotiables.

When is a good time to buy a home?

The best time to buy a home is during a “buyer’s market.” Put simply, this means that there is more favorable market pressure toward homebuyers compared to sellers. Generally, this means there is a surplus of available homes, meaning homebuyers have more choices. Since there is high supply and high demand, sellers have to meet buyers more in the middle and negotiate more to close deals.

All of these factors combined mean that home prices should be lower than average (or at least lower than they have been in recent months).

In contrast, a seller’s market means that home prices are higher given a high demand and low supply. You may have fewer options for available houses, and you’ll have to pay more because sellers have more bargaining power.

Try to time your home purchase so it’s during a buyer’s market. If you aren’t sure when that is, ask a realtor or real estate agent. They may be able to advise you on whether to purchase a home now or wait down the line.

So, will 2023 be a good time to buy a home? To get a clear answer, you have to look at the current data, trends and predictions for the coming year.

Recently, home prices across the U.S. have increased to astronomical levels. Data from Zillow, the leading online marketplace for real estate by user volume, shows that average U.S. home prices have risen by 29% since the beginning of the Covid-19 pandemic in 2020.

In 2022 alone, mortgage rates skyrocketed from 3.22% in January to 7.08% by the end of October. While it’s impossible to know for sure how mortgage rates will move next year, many are making predictions. On the low-end Fannie Mae predicts an average range of 6.2% and 6.6%, while others, such as the Economy Forecast Agency (EFA), predict rates to hit 7% in the first quarter of 2023 and top out above 11% by the fourth quarter. However, increasing home inventory and fewer recent home purchases in major markets could indicate an incoming market correction.

In other words, you might consider waiting for a few months or until the middle part of 2023 before buying a home to see if prices decrease.

How much money do you need to buy a house in 2023?

Take a hard look at your budget and figure out how much you can spend on a property. To get a mortgage, you need at least 3% of a home’s asking price for a down payment. Think of this as a lump sum good faith payment to show a home seller that you are serious about paying off your mortgage over time.

If you’re a veteran, you may be able to access special mortgage loans that don’t require a down payment. These loans are the exception rather than the rule. In addition, it’s wise to make as much of a down payment as possible toward the home’s value because it will lower your interest rate and how much you have to pay each month on your mortgage.

Your monthly mortgage payment is largely tied to your initial mortgage agreement (at least for conventional loans). If you want your monthly payments and mortgage rates for homeownership to be low, put down as much cash as you can toward the purchase price, even if you use credit cards. However, it’s important to do a cost-benefit analysis to see if you’re gaining (or losing) by paying with a credit card. There are certainly risks, but there can be benefits as well.

This is also true for property taxes, PMI or private mortgage insurance, and other costs.

Don’t forget to consider closing costs, either. Closing costs usually equal 3% to 6% of a property’s total, and they cover various fees to close a real estate deal, like attorney fees, title insurance costs, etc.

For example, say that you want to purchase a home worth $350,000. In most cases, you’ll need a down payment of at least 3% of $350,000, which is $10,500. After the down payment, you’ll have to account for closing costs. To split the probably costs down the middle, plan for 4.5%. 4.5% of $350,000 is $15,750. In total, this means you’ll need around $26,250 to purchase that $350,000 house.

You can try negotiating closing costs and securing a loan for a smaller down payment. However, it may be wiser to save more than you need so that you can comfortably outbid other interested parties and purchase the home quickly.

Step 2: Talk to a real estate agent

The best way to buy a house in 2023 and beyond is to contact a knowledgeable real estate agent. Real estate agents are homebuying experts who know the local market and can take you to houses that meet your needs in your target area.

Say that you want to find a home with three bedrooms and two bathrooms, and a big yard for your dog. Rather than looking through online listings and driving around yourself in search of a stellar property, you can speak to a real estate agent and explain this, plus tell them all your other necessities or desires.

The real estate agent will then look on the market and multiple listing services (MLS) for your area to find appropriate homes. They’ll draw up a list, contact the sellers and invite you to tour those homes so you can pick the best one.

In short, real estate agents make finding the perfect home much easier and faster.

Do you always need a real estate agent?

No, and skipping a real estate agent could save you some money in terms of closing costs (real estate agents usually take a commission, which is a percentage of the home’s asking price). However, cutting the middle man means you’ll have to do much more research and find appropriate homes for your needs.

Generally, it’s only advisable to skip hiring a real estate agent if you already have a property in mind and know the homeowners personally.

Step 3: Contact lenders for preapproval for your mortgage


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