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Published by Contour Mortgage on March 12 2021

How Home Buyers Can Navigate a Busy Spring Sellers’ Market

Topics: Real Estate Agents, 203k Loan, first time home buyers, FHA

With the spring housing market typically the busiest time of the year for buyers and sellers, 2021 is no different. Additional circumstances, such as pent-up demand due to novel coronavirus (COVID-19) restrictions, record-low mortgage and interest rates, and new remote work and learning needs, are all contributing factors. 

According to the Federal Reserve System Selected Interest Rates, these will remain within 0 to 0.25 percent for the near future. 

Such factors are also contributing to a record-breaking spring buying season in an already competitive market. Sellers are receiving multiple, higher offers with fewer contingencies, whereby homes are quickly selling within an average of 16 to 30 days

If you’re currently looking for a new home, it’s best to be organized and have your documents and commitment letters ready for a streamlined process—from opening bid to closing day. 

Learn how to effectively navigate the 2021 spring real estate market by understanding current market conditions, mortgage options, financing and credit measures, and more. 

 

Market Conditions

Traditionally one of the busiest times of the year to look for a home, the spring real estate market is noisier than ever. This is due to current market conditions, pent-up demand, and changing professional and personal lifestyles. 

According to the National Association of Realtors (NAR), contract signings are up 15 percent from 2020, while unsold listings have decreased 34 percent—a clear indication homes are selling at a much quicker rate than recent years. 

Other factors include previous apprehension during the height of the COVID-19 pandemic. With mandatory health and safety restrictions now in place, and availability of virtual tours, livestream open houses, and videoconferencing tools, the market has rebounded even stronger. 

These will continue to improve and increase, especially as realtors and sellers follow both the NAR and Centers for Disease Control and Prevention (CDC) preventative measures and social distancing guidelines. 

 

Pre-Approval & Commitment Letter

A pre-approval or pre-qualification letter previously was the norm at an open house or listing appointment, separating so-called “lookie-loos” from serious buyers. With stronger competition, more potential buyers and less available inventory, it’s almost a necessity to have a mortgage commitment letter

Issued by an approved mortgage lender, this document is prepared by an underwriter subsequent to a thorough evaluation and acceptance of a borrower’s pre-approval application. 

Outlining details such as loan type, funding amount, and other requirements, it demonstrates official good faith you've been pre-approved for a mortgage loan. 

While a pre-approval is also acceptable, a commitment letter offers the highest proof of funds, eligibility, and readiness. 

 

Financing & Credit

Organized financials demonstrate you’re a serious buyer ready to make an offer. Having updated documentation, such as recent credit reports, bank statements, and pay stubs, helps mortgage lenders determine what you can afford. 

Additional tax information, such as W-2 statements and previous income tax returns, can also be helpful in setting loan terms and limits.

Credit rating requirements can also vary by loan type. Borrowers with less-than-satisfactory scores and other limitations could be exempt from stringent requirements if they qualify for a government-backed loan. You can also leverage your current standing by making additional payments, consolidating credit, and negotiating lower interest rates. 

 

Mortgage Options

 As aforementioned, current mortgage rates are at an all-time low at least through 2021. This can facilitate easier approvals for conventional mortgages and already-less- stringent government-backed mortgage loans

Insured and subsidized by federal agencies, the most common government-backed loans are offered through the Federal Housing Administration (FHA), U.S. Department of Agriculture, (USDA), and Veterans Affairs (VA) for active and retired U.S. military personnel. 

While each has their own set of requirements, they all help foster home ownership for those who might not otherwise have access. Benefits include low or no down payments, reduced closing costs, and lower credit and debt-to-income ratios. 

Having these loans as additional options can help home buyers, especially first-timers, gain an edge over others when submitting an offer. 

If you’re currently looking for a new home, it’s best to be organized and have your documents and commitment letters ready for a streamlined process—from opening bid to closing day. 

Consult Industry Professionals

It’s important to work with industry professionals who have your best interests in mind. This begins with a reputable mortgage lender that can guide you in the right direction.

Many mortgage lenders also have long-term, trusted relationships with others who can assist in your process, such as local real estate agents, attorneys, title companies, appraisers, and more. 

It’s also helpful to consult the NAR directory in your local area for additional information.

 

Consider a Fixer-Upper 

If your offers consistently fall short on a new construction or conventional home, consider a fixer-upper or rehab property. You can truly make the home your own, while gaining additional equity and other attractive value-add features. 

A FHA 203(k) home improvement loan is the best option for qualified borrowers. Based on the home’s anticipated value after project completion, it covers up to $625,000 of the purchase, accompanying improvements, and upgrades.

Borrowers with healthy credit scores can also qualify for lower down payments and other benefits.


Working Together

When it comes to understanding the currently busier-than-usual spring real estate market, it’s best to consult a reputable mortgage lender for additional guidance, support, and assistance. 


 

Contour Mortgage provides lending services throughout the United States. Contact us for a free consultation and to learn how we can help you achieve the best financing for your dream home this year. 

 

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