The housing market is always changing, so it can be hard to determine exactly when to buy — and when to wait it out or how to come up with the down payment? What if home prices or interest rates rise? What if lower costs are just around the corner? No crystal ball? Here are some factors to consider before making your decision.
1. The State of the Market: Is a housing market crash or recession likely? Look to expert predictions to determine how the future of the market may look.
2. Supply and Demand Trends: If supply is up and demand is down, you might be able to get a great deal. If the opposite is true, there’s probably a lot more competition (and higher prices due to bidding wars). We can talk about the market trends to come up with a strategy for you.
3. Mortgage Interest Rates: Keep tabs on overall economic trends. If rates are expected to keep rising, acting sooner could save you money in the long run, especially if home prices also rise. And you may be able to refinance for a lower rate in the future, too.
4. Home Prices: Consider that price declines can help you get a deal upfront, but they could also mean your home may not gain as much value immediately; this might be more of an issue if you’re not planning to stay there for the long haul. Small price fluctuations in either direction are usually not indicative of larger trends.
5. Personal Finances: Your financial situation is the most important factor. Does it make sense to buy now? Consider your credit score, debts, income and other expenses when evaluating whether or not buying a home is affordable. If coming up with a down payment can feel like quite a hurdle, it is worth considering gift funds.
Getting help with the down payment is fairly common — roughly 29% of younger millennials receive gift money from a loved one. It’s important to understand the rules surrounding this strategy when applying for a mortgage. Here’s what you need to know:
Q: How much can you get?
A: This depends on your mortgage program: With FHA loans, for example, the entire down payment can be funded via gift money. Conventional loans will only allow this if you put down 20% or more.
Q: Who can offer gift money?
A: A conventional loan only allows for family gifts, while others may let you use gift money from friends, employers, down payment assistance programs and more.
Q: How should it be documented?
A: If you’re using gift money for your down payment, your lender will require a letter from the gift-giver which states that you, the recipient, do not need to repay the funds. If you do repay the money later, it could be considered mortgage fraud.
You may also need a copy of the check or wire transfer from the gift-giver, your deposit slip and the withdrawal slip showing them taking the funds from their bank account. You might be asked to share a copy of your bank statement (showing when and how much was deposited), too. You’ll need to create a paper trail for the lender to their specifications.
Do you need help finding a home — and a trusted lender? Reach out for more guidance. Your experienced Realtor has Resources.
