Buying in 2017? 4 Steps to Take Now
By Jennifer Riner
Although interest rates recently suffered their first hike of the year, the financial advantages of home buying are still alive and well. With lesser monthly expenses and the potential for returns, buying in 2017 is a rewarding venture. And, considering the active spring selling season is right around the corner, now is a good time to start planning for a successful home purchase. But before you jump in head first, a little pre-planning is crucial.
Here are four steps for home buyers to consider before entering the market in 2017:
1. Forecast Your Costs
Currently, the median sales price in Los Angeles is $700,000. Using the average mortgage rate on a 30-year fixed loan of 3.97 percent, monthly payments on the typical home purchase hover around $3,200 per month. This amount includes principal, interest, property taxes and insurance. Compared to the median Los Angeles rent of $4,401 per month, homeownership offers substantial monthly savings.
Keep in mind, the estimate above includes a 20 percent down payment of $140,000, less closing costs. Use a mortgage calculator to determine how much you can realistically afford based on available savings and an achievable interest rate.
2. Check Your Credit
Not everyone receives a seriously low interest rate – even with today’s averages. Lenders check borrowers’ credit scores to protect themselves from mortgage payment default. Home buyers should aim for 740 or higher to receive the best interest rates available. Before applying for a home loan, check your credit score for remarks. Amend any errors that could pull your score down. New activity often dissuades lenders, so avoid opening another line of credit just prior to submitting your mortgage application. Paying your bills on time and spending around 30 percent of your total available credit boosts your score – and could save thousands of dollars over your loan term.
3. Search for an Agent
You may be a pro at searching for-sale listings online, but no amount of at-home due diligence outweighs the expertise of a qualified real estate agent. Aside from assisting in the home search, agents schedule showings, write up offers, negotiate on your behalf and smooth out any potential bumps in the road. Going unrepresented is a risky endeavor in a high-priced market like Los Angeles, but expert guidance protects you and your finances equally.
4. Find a Lender
Getting pre-approved before you start making offers is a good strategy, particularly in the Los Angeles real estate market where competition among buyers is high. Sellers are more likely to take offers with pre-approval stamps seriously. Most real estate agents have lenders they can recommend, but you’re welcome to conduct individual research. Consider rate shopping, or receiving two or three quotes before settling, to ensure you receive the lowest rate available. Assuming inquiries are made within a relatively short time frame of 45 days or less, your credit score won’t suffer multiple hard inquiries. In addition, more money down or opting for a shorter loan term helps lessen your interest rate if you’re looking to strategize.
Ready to get started on your La Cañada Flintridge home search? Contact Harb & Co. today.