5 Tips for Buying a Home in a Competitive Market

Realtor handing over keys to new house

Owning a home is an important goal for millions of people. In any market, the home buying process can be both exciting and stressful. However, in the current competitive market, house shopping can almost feel like a competitive sport. Houses are being sold at a record pace as sellers are receiving multiple offers, some well over asking price. Buyers must act quickly and aggressively to have a chance at their next home. Although, it is important that they don’t get caught up in the competitive process and lose sight of their end goal.

If you’re ready to take the leap and buy a home in 2021, we put together five tips to help you through the process of purchasing your dream home in today’s market.

  1. Find out what you can afford. Look at your finances before you start shopping to find out exactly how much home you can afford. This will help narrow your search and make sure you don’t fall in love with a house outside your budget. If you don’t already have a budget, put one together to see how big of a monthly payment you’ll be able to take on. A general rule of thumb is to make sure your housing costs don’t exceed 28% of your income. Keep in mind the additional costs of purchasing and owning a home that aren’t included in your mortgage payment like your down payment, closing costs, property tax and insurance. Knowing how much you think you can afford monthly will help your lender prequalify you for an amount that fits into your financial goals without stretching you too thin.
  2. Find a local loan officer and get prequalified for a loan. When it comes down to it, local relationships and speed are key in a competitive market. If the selling agent has a good relationship with your lender, you’ll be on good standing as they are sorting through offers. Local lenders know the unique market you are buying in and also offer quick turnaround which is crucial if you want to stay competitive. Once you have selected your preferred lender, work with them to get prequalified for the highest amount that you can afford. This will give you flexibility when making an offer and expedite the process when the right house comes on the market. Having a prequalification letter also shows the seller that you are qualified to make this purchase and that you are serious about closing the deal.
  3. Make a list of your priorities. Before you begin house shopping, list out your needs and wants. Needs are the non-negotiable features your next home must have, while wants are the features you would like to have but are willing to compromise on. Having your list ready will help you decide if a home meets all your minimum requirements faster so you can decide if you want to move forward or if you should keep shopping.
  4. Make a strong offer. Having a good understanding of the market will help you know what will be expected by the sellers so you can quickly and confidently lead with an aggressive offer. You can strengthen your offer by including certain concessions such as letting the seller choose the closing date or removing certain contingencies. A contingency is a clause in a real estate contract that states the certain conditions that must be met before the sale can clear. If you go this route, be sure you fully understand the risks associated before you decide to move forward. 
  5. Stay focused and don’t get discouraged. A competitive market could mean that you aren’t selected on multiple homes that you put an offer on. While this can be discouraging, it is a normal part of the process. Talk with your realtor and mortgage lender about what you could do differently next time to strengthen your offer so sellers can’t pass it up. Be patient and stay focused on your goal. Your next home is out there.

If you’re dreaming of a new home, we’re here to help you turn your dream into a reality. Our mortgage team understands the local market and is here to guide you through the process from application to closing. Get in touch with one of our mortgage lenders or apply online today.