Marketers predict 2023 to be a strong buyer’s market. In April 2023, home prices have dropped by 4.2% as compared to the last year.
Although mortgage rates continue to rise, they are expected to stabilize in the coming months. By the end of 2023, home buyers will likely benefit from low purchase prices nationwide.
If you are thinking about buying a house in 2023, start your preparation now.
Home Buying Facts
- Declining Home Prices: Median US home prices have dropped from $4,79,500 in Q4 2022 to $4,36,800 in Q1 2023.
- Mortgage Rates are Stabalizing: The 30-year fixed-rate mortgage is expected to average in the range of 6% to 6.50% in 2023.
- Healthy Credit Score:The median credit score for buyers in Q3 2022 was 768. A credit score of 670 or higher is considered optimal while applying for home loans.
- BottomLine: In 2023, homebuyers can take advantage of lower home prices and fulfill their dream of buying a house. To find houses online, download the Houzeo Mobile App and search homes at your fingertips!
7-Steps to Buying a House
Here are the 7 steps to owning a house:
Step 1: Check Your Creditability
Ensuring you are financially prepared is one of the first steps to buying a house.
Here are some things to know before buying a house:
- Healthy Credit Score: Higher credit scores can increase your chances to get mortgage loans with low-interest rates. A good credit score depends on the timely payment of loans. A score of 640 or higher is optimal to qualify for the home loan process.
- Income & Employment Status: Lenders or mortgage brokers will always check your job profile, work history, and family background. Being financially sound will increase your chances of getting a home loan quicker.
- Debt-to-Income Ratio (DTI): DTI is calculated by dividing the monthly debts by your gross monthly salary. Money lenders use DTI to evaluate the mortgage amount they can lend you. DTI of 36% or less is considered safe and healthy by most lenders.
- Down Payments: A down payment is a lump sum amount paid by the buyer at the time of closing. It assures the lenders that the borrowers have a stake in the property and they will make mortgage payments. It ranges from 3% to 20% of the home purchase price.
- Closing Costs: Closing costs are a set of expenses paid by the seller and the buyer to finalize the real estate transactions. These costs are separate from the price of the property. These include application fees, appraisal fees, lender’s title insurance, discount points, etc.
Step 2: Analyze Your Budget
Setting a realistic budget will help you determine how much money do you need to buy a home.
According to the Balance, the average upfront cost to buy a new house in the U.S. is $40,559. It includes the average down payment on a house, closing costs, and the first monthly payment.
One of the ways to measure home affordability is to calculate the ratio of housing expenses to income. A housing expense ratio of less than 30% is considered affordable.
- 📝Note: If you are looking to buy a house with cash, you can skip Step 3 & 4.
Step 3: Select a Mortgage Type and Get a Preapproval
Depending on the interest rates and your eligibility, you can select the loan type that meets your requirements.
- Conventional Loans: Conventional loans are the most popular option for home buyers. The lenders provide home loans with a minimum of 3% down payment assistance and a minimum credit score of 670. However, they are not backed by government entities.
- FHA Loans: Federal Housing Administration (FHA)loans are less of a risk for lenders and are backed by government entities. These loans are available with a 3.5% down payment and a minimum credit score of 500.
- VA Loans: Veterans Affairs (VA) mortgages are provided to veterans, Armed Forces, and National Guard members. Eligible members neither need to pay a down payment nor fulfill credit score requirements.
- USDA Loans: Backed by government entities, the U.S. Department of Agriculture (USDA) issues loans to low-to-moderate-income borrowers. You don’t need to pay any down payment but require a credit score of at least 640.
✅Get Your Loan Preapproved
The lender will approve your home loan after reviewing your credit score. After getting your loan preapproved, show the preapproval letter to your real estate agent.
They will search properties on MLS and choose the best alternatives that suit your requirements.
🧑💼🏠 Get Home Buying Assistance From a Real Estate Agent!A real estate agent will assist you in finding the best house that fits your budget and requirements. Also, they will help you navigate the real estate market and help you negotiate final offers. In most cases, sellers pay the real estate commission to the buyer’s agent. They generally charge 3% of the purchase price.
Step 4: Start Your Search to Buy a Home
Pen down your list of top priorities and narrow down the houses that meet your criteria. Here are some of the basics you must consider if you’re buying a home for the first time:
- Neighborhood: Pick a location where basic facilities like public transport, offices, gardens, schools, and clubs are nearby.
- Price: Check the neighborhood to know the current price of the area. It helps you to avoid overpaying for the property.
- Home Condition: Self-examine the home before hiring a home inspector.
💡 Pro Tip: Search Properties Without a Realtor!
With Houzeo, start your search without a realtor. You can sort homes with locations, mark them as a favorite, and request showings. Making your home-searching process simpler!
⏩ How to Buy a House Without a Realtor: Read our blog to know more.
Step 5: Make an Offer to the Seller
After shortlisting some best houses, make an offer to the seller. An offer letter implies that you are interested in the property. This letter must contain your contact details, the offer price, and the estimated response time for the seller.
After making an offer, your real estate agent will get in touch with the seller. The seller can either accept, reject, or give a counteroffer. It is best to let your real estate agent handle the negotiations.
💡Pro Tip: Increase Your Purchasing Chances With Earnest Money!
Most real estate agents recommend including an earnest money deposit while sending an offer. It is typically 2% of the purchase value and will be adjusted in the down payment or closing costs. However, if the deal falls through, you might lose the deposit.
Step 6: Schedule a Home Inspection & Appraisal
A home inspection and a home appraisal save you from purchasing a damaged property and making a bad investment.
A home inspection determines the property’s condition, while a home appraisal tells you its estimated market value.
Let’s study them in more detail:
➡️Home Inspector: The home inspector will inspect the home, test electrical systems, and check the structural parts. The cost of home inspection ranges from $200 to $500 nationwide. The price varies depending on the size, age, and locality of the house.
➡️Home Appraiser: A home appraiser helps you determine the value of your buying property. They evaluate the property based on various factors, such as age, locality, land price, etc. The cost of a home appraisal ranges between $313 and $421.
🙋♂️🙋♀️ What to Do After Home Inspection & Appraisal?
After home inspection, your home inspector will give you a home inspection report that states the condition of the property. If the damage is extensive, you can choose to cancel the purchase entirely, or negotiate with the seller for the repairs.
Step 7: Close the Deal
The real-estate agent will give you a seller’s disclosure statement three days before the closing date. The document outlines the details of the property and defective materials. Also, it helps you to evaluate the total amount you need at the time of closing.
After paying the closing cost and signing all necessary documents, you can close the deal.
How to Buy a House Near Me
First-Time Home Buyer Tips
It’s exciting- and overwhelming- to think about buying a home for the first time. Many questions might continuously revolve around your head.
– What are the things to know before buying a house?
– Is now a good time to buy a house?
– What are the steps to buying a house for the first time?
– What questions to ask when buying a home?
– How to start buying a house?
From mentally preparing yourself to arranging funds, there are many things at stake with a first home!
Understanding the requirements to buy a house can simplify the overall process. Apart from following the steps mentioned above, you must consider the following things before buying a home:
- Clear Understanding of Your Home Requirements: Buying a home is a commitment. Ensure you are mentally and financially prepared to take one of the biggest decisions of your life.
- Healthy Credit Score: A credit score indicates your potential to take a loan. It has a direct impact on the loan types, borrowing amount, and interest rate.
- Down Payment & Closing Costs: Down payments are one-time payments made towards the cost of a house. Closing costs are the final expenses to complete the real estate transaction.
- Reliable Real Estate Agent: A real estate agent will assist you in the overall house-buying process. It is important to hire a real estate agent who duly understands your requirements.
✍️ First-Time Buyers: Own a Home with HCV Homeownership Program!
The Housing Choice Voucher Homeownership Program is a governement program for first-time home buyers. It helps you with the home-buying process if you have low income and want to buy a house.
⏩ First Time Home Buyer Programs: Here are some initiatives that offer various benefits, such as financial aid, education resources, and other support.
Follow our step-by-step guide and hire a well-reputed real estate agent to make the overall house-buying experience more manageable. Once everything is done, you can finally move to your own property and enjoy the new status as a homeowner.
Frequently Asked Questions
1. Will 2023 be a good year to buy a house?
Yes! Property rates declined by 8.9% in Q1 2023 compared to Q4 2022. It is a great opportunity for purchasers to buy a house in 2023.
2. What is the best credit score to buy a house?
The best credit score for buying a home is 740.
3. How much downpayment to buy a house?
Generally, down payment ranges from 3% to 20% of the purchase price of the home.
4. How to buy a house with bad credit score?
Yes! You can buy a house with bad credit score.
5. How long does it take to buy a house?
After entering into contract, it takes 30-45 days to close the deal.
Do You Want to Sell Before Buying? Read These
- Flat Fee MLS: Check out the rankings of the best Flat Fee MLS Listing Services
- How to Sell a House by Owner: Know how to sell your house yourself without a Realtor
- Selling a House: Know how to sell a house with ease