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Let’s face it: Between high mortgage rates and steep property prices, buying a house can be prohibitively expensive these days. But waiting for conditions to improve could take a while. Economists at the Mortgage Bankers Association predict rates will stay in the mid-6% range through at least 2027, and real estate values remain inflated by the pandemic buying boom. So what can you do? Some people who are tired of putting off a move are stomaching the high mortgage costs with the goal of refinancing their loan if and when rates drop in the future. But if you can’t afford to do that, it’s not hopeless. Here are five things to do if you want to buy a house this year.1. Try negotiating the price. Although most people have been paying top dollar since the pandemic, the tide is turning, according to economists. Unlike back then, today’s high borrowing costs are sidelining many would-be buyers just as the number of homes for sale is growing.
In many cases, this combination is giving buyers the upper hand and forcing the first reality check on sellers in nearly five years. In fact, the median U.S. sale price in March was almost $39,000 less than the median U.S. list price, according to data from the brokerage Redfin. This gap — the biggest since May 2020 — shows sellers are increasingly overestimating what buyers are willing to pay.
Caveat: Real estate is very location-specific, so it’s important not to assume national trends apply everywhere. Meet with an agent and research your local market to level-set your expectations for price and other competitive factors. If you live in Chicago, you may still need to prep for a bidding war, while in Houston, you might have success offering under asking price.
2. Ask the seller to make other compromises. If you can’t get anywhere on price, don’t give up. Once a seller has received an offer, they may be willing to make other concessions in order to close the deal. Consider asking them to cover closing costs, pay for repairs, or even pay for you to have a lower mortgage rate. (Yes, that’s a thing.) It worked with 44% of U.S. home sales — nearly a record high percentage — in the first quarter, according to Redfin.
3. Think outside the box. The affordability equation isn’t as straightforward as price and rate. Explore all your options, even less conventional ones. Can you rent out a room to a boarder or ask a relative to live with you to help defray your costs? Could you look for a smaller house than you might have otherwise in order to stay within your budget? Would you consider buying a fixer upper and living in it as-is until you can save up enough to renovate?
4. Consider buying new. When mortgage rates are a deterrent to buying houses, builders aren’t able to wait for conditions to improve like other sellers might be able to. That’s why 61% of builders surveyed by the National Association of Home Builders in April offered some kind of sales incentive. Builders may be willing to cut their price, throw in free or reduced-cost upgrades, cover closing costs, or temporarily pay down your mortgage rate.
5. Build in wiggle room. Unlike a fixed loan payment, insurance and property tax bills change every year, and could go up by a lot, depending on where you live. When you’re determining how much you can afford to pay for housing each month (mortgage + insurance + taxes,) make sure you could handle potential increases in the latter two. You don’t want to be able to cover today’s costs and nothing more. (Using SoFi’s Home Affordability Calculator in Advanced mode can help.)
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