A data analyst and writer for NerdWallet spent hours "playing with the numbers" in order to advise prospective homebuyers shopping in today's groundbreaking housing market.
Elizabeth Renter published a piece exploring ways in which consumers can make the smartest decisions.
"Buying a home can be intimidating—a high-cost goal with a complex purchasing process," she wrote. "But it’s especially scary in a seller’s market, amid tightened lending standards, high prices, low supply and, oh, a global pandemic. In spite of this, more homes changed hands in 2020 than in any of the past 14 years, and I was among those braving the headwinds."
She's not sharing a complex spreadsheet system or secret formula for choosing a mortgage, she notes, but rather lessons personally applied in order to "prove that the best financial advice is a starting point, not an edict, meant to be applied through the lens of personal circumstances."
To that end, she advises, "know how the market applies to personal circumstance."
"Selling a home in this market might be a cinch," she noted, "but buying a replacement could bring challenges."
She continues, "buck the rules, with caution."
"Writing an attractive offer on a home isn’t only about the price you’re offering," Renter said. "Faced with multiple offers or the knowledge that more could be coming, a seller will lean toward those that make the transaction look as simple and painless as possible. An agreeable closing date, minimal contingencies, and proof of your ability to obtain financing are all part of a competitive offer."
Calculate several scenarios, she added.
"Weigh the costs and benefits of each," she wrote. "If the payments for a 15-year fixed-rate mortgage still allow you to stay on top of your other bills and long-term financial goals such as retirement, you’ll save considerably in the long run. For example, financing $240,000 for 30 years at 3% costs about $124,000 in interest, where a comparable 15-year mortgage costs $44,000. Also, if you’re looking to take advantage of super-low interest rates, shorter-term loans generally offer the lowest rates."
She also recommends that homebuying hopefuls shop around for a lender and loan.
"Gone are the days where the neighborhood banker drew up loan documents and [the borrower signed] on the dotted line," she said.
Today's buyer has options that mean finding a mortgage to fit a personal budget, lifestyle, and long-term financial goals.
Read the full article at nerdwallet.com.