The 2021 housing market is a perfect storm of the good (really low interest rates), the bad (high demand for houses), and the ugly (bidding wars and escalating home prices). Everyone's situation is unique, so it's critical to understand what's going on in the housing market, the likely future of interest rates, and all the pros and cons of buying in 2021 before taking action.

How to buy a house in 2021

If you decide now is the right time to buy a home, here are tips for purchasing a house in 2021.

Calculate how much home you can afford

Before you start shopping, get a realistic idea of how much a lender might let you borrow. That way, you won’t fall in love with a house that’s simply out of your price range. Freddie Mac’s Home Affordability Calculator is a good place to start. Just enter your annual gross income, monthly debt payments, down payment, and anticipated mortgage term and interest rate. The calculator will give you an idea of your budget.

Get mortgage pre-approval

To get pre-approved for a mortgage, you complete a mortgage application, authorize the lender to check your credit, and provide basic information on your income and assets. If the lender pre-approves you, they’ll issue a pre-approval letter, which is an offer to loan you a certain amount. This pre-approval letter is typically good for 30 to 90 days. Pre-approval shows sellers that you’re a serious buyer and can secure a home loan. This makes a seller more likely to consider your offer.

Find a real estate agent to work with

A real estate agent makes the homebuying process easier by setting up viewings on your behalf and providing information on houses you’re interested in. But perhaps more importantly, an agent can help you negotiate the best price on a home you want to purchase. Family and friends can be great sources for finding a real estate agent. You can also visit Credible to find an expert real estate agent in your market.

Look for houses

Once you tell your agent your price range and the type of home you’re looking for, your agent will show you homes that fit your criteria. Finding a house you love at a price you can afford can take some time, so don’t get discouraged if the process takes longer than anticipated.

Make an offer

When you find a house you want, your agent will help you submit a written offer. You may also need to put down an earnest money deposit, which is usually 1% to 2% of the purchase price. This deposit will go toward your down payment and closing costs if your offer is accepted and you buy the home. However, if you agree to buy the home and later cancel, you lose your deposit. From here, the seller will either accept your offer, reject your offer, or come back with a counteroffer. If you’re worried about getting into a bidding war for the home, your real estate agent can write an escalation clause into your offer. This clause essentially says you’ll pay a certain dollar amount over another offer, up to your budget amount. That way, you can outbid other potential buyers and improve your chances of having your offer accepted.

Apply for a mortgage

Once your offer is accepted, it’s time to get your financing in order. Return to the lender that provided your pre-approval to let them know you’re ready to move ahead. You may need to provide additional documentation for the loan underwriter to verify your income, assets, and employment. This process can take 30 days or more and may involve a lot of back and forth, so respond to any requests from the lender quickly to keep your application moving.

Get a home inspection and appraisal

The lender may order an appraisal to confirm the value of the property. It’s usually a good idea to also get a home inspection. During the inspection, a trained inspector goes over the property specifically looking for problems, such as faulty wiring or plumbing, a damaged roof, lead paint or mold, structural damage, and more. The inspector will provide a report outlining all the problems found on the property. Every home has some issues, so it’s helpful to read through the report with your agent and ask whether they see any major red flags. If the home has major structural damage, you may want to reconsider buying it.

Negotiate with the seller for any needed repairs

You can ask the seller to correct some of the problems found during the inspection. Determine which items you want the seller to repair, and your real estate agent will handle the negotiations. If the seller agrees to chip in for some of the repairs, they may handle the repairs themselves, hire a contractor to complete them, or offer a credit toward your closing costs to cover the cost of repairs after you close.

Close

Three days before closing, your lender will send you a Closing Disclosure, which summarizes the loan details. Read over the Closing Disclosure carefully to ensure the numbers don’t vary too much from your loan estimate. Your lender will also schedule a closing meeting. You’ll need to bring a photo ID and your closing costs — usually in the form of a cashier’s check or proof of wire transfer. At the closing meeting, you’ll sign your mortgage note, deed of trust, and a pile of other paperwork. After closing finishes, you’re officially a homeowner. If you need brilliant tips and suggestions about buying a house in 2021, just contact salt finance. Salt Finance is a boutique home loan & car loan specialist helping hard clients to get a better deal, save interest and own their homes sooner. We are located at Mortdale, NSW. Salt Finance is ready, call us now!