Two words to describe buying a home over the last two years?
The price of homes in the United States appreciated 19.9% between August 2020 and August 2021, a 12-month record, according to S&P Dow Jones LLC.
Depending on whom you talk to, the market is expected to continue to stay hot this year, though at not quite the same rate as 2021.
So what should you be thinking about if you’re easing into this hot market in 2022?
Here are some important things to know.
5 Tips for Buying a House in 2022
1. Yes, You Can Buy a House in a Seller’s Market
Honestly, it’s doable.
A pre-approval letter is a great way to get started, showing the seller that you can be depended on. Submit an offer quickly, and go in planning to minimize your contingencies.
Then, be willing to offer a generous earnest money deposit, offer above asking price and be willing to move quickly.
It is a seller’s market after all, so they have the leverage. But if you’re willing to make a few sacrifices you can land that dream home right now.
2. Mortgage Brokers Can Help You Get the Best Loan
Buying a home can be an exhausting process – and that doesn’t even take into account all the headaches that come with finding the right mortgage to go along with your major investment.
If you’d rather focus on working with your real estate agent to find the right home, then you might find a mortgage broker to be helpful. For a small commission, usually paid by the lender as a percentage of your loan, a broker can help you find the right mortgage for your needs.
They’ll do all the research, find the best options, and present you with the information. This is a great option for first-time buyers who feel overwhelmed, or really busy buyers who just don’t have the time to shop loan options. Mortgage brokers can also help buyers with lower credit find a lender willing to work with them.
3. Home Inspections Are as Important as Ever
During a hot seller’s market, buyers may be tempted to move quickly and forego some of the standard safeguards — like the home inspection. In some cases, the seller might ask for that.
Don’t do it. That’s a giant red flag.
Your potential dream house might look pretty, with a nice fresh coat of paint and brand new hardwood floors. But a home inspection will tell you what’s going on behind the walls, under the house, on the roof, inside the HVAC units, and so many other important aspects that might not be visible at first glance.
The cost usually runs around $350 for an average size house, and only takes a few hours. Skipping this important step could turn your dream house into a nightmare a few years later. So, we repeat: Don’t do it!
4. Finding the Right Contractor is Incredibly Valuable
In this insane housing market, you might just decide to stay put and turn your current home into your forever home.
If that’s the plan, then finding a good, trustworthy contractor is as important as ever. You don’t just want to jump in headfirst and hire your brother-in-law because he’s a good handyman.
Do your research, get multiple quotes and estimates, be thorough with the contracts, and know their rates ahead of time. Also, make sure anyone you hire is insured and licensed. Get references from other homeowners who have used contractors that you’re considering.
Too many people skip those all-important steps and end up regretting it months later.
5. The 20% Down Payment is Making a Comeback
More homeowners are realizing the value of equity in the current market, meaning the 20% down payment is becoming more of a norm.
In fact, the 100% down payment was quite the thing in 2021. In April, 25% of buyers paid cash, according to the National Association of Realtors. Of the remaining three-quarters of buyers who did finance a home, 50% made a down payment of at least 20%, the National Association of Realtors reports. The median down payment for September 2020 through February 2021 was 16%, according to Redfin data.
The pandemic kicked the market into gear. Combine that with historically low interest rates and wealthy home buyers looking to move, or purchase additional homes, and higher down payments are on the rise.
That doesn’t mean you have to put down 20%. It’s not a requirement. But it’s something to consider if you have the margin in your finances.
Robert Bruce is a senior writer for The Penny Hoarder.