Rising Housing Market Advice For Home Buyers With Limited Budget

This article is about the rising housing market for homebuyers with a limited budget:

Home prices keep on increasing. Many homebuyers are being priced out of buying a home in today’s market. In this article, we will discuss and cover the following topics:

  • Increasing housing market
  • Buying a home in today’s booming housing market
  • How much home can I afford?
  • How much home can I afford versus how much home can I qualify?

There are still opportunities for homebuyers. Low interest rates and areas of affordable housing make homebuyers able to become homeowners. Gustan Cho Associates are experts in helping homebuyers with bad credit or unique credit situations qualify for mortgages. Over 75% of our borrowers are folks who could not qualify at other lenders.

Prequalify for a mortgage in just five minutes. 

Increasing Loan Limits Due To Skyrocketing Home Prices

Many homeowners who have purchased homes a few years ago are very happy. The values of their homes have increased exponentially. Average home values have increased over 15% in 2020 alone. Some homeowners who purchased homes five years ago have homes that have appreciated over 50%. 

The rising housing market has become more and more of a problem for home buyers. The rising Housing Market has forced FHFA to raise conventional loan limits for three years in a row

Conforming Loan Limits for 2021 are now at $548,250. HUD, the parent of FHA has raised FHA Loan Limits to $356,362.

HUD raised FHA Loan Limits for five years in a row due to the rising housing market.

Many of our pre-approved borrowers at Gustan Cho Associates Mortgage Group are facing obstacles in finding a home due to the Rising Housing Market. In this blog, we will discuss solutions in finding homes in the rising housing market.“

UPDATED CONFORMING LOAN LIMIT FOR 2021

HUD 2021 FHA LOAN LIMIT

Rising Housing Market In Past Few Years

Many folks are ready and qualified in buying homes but are facing issues with the rising housing market.

The economy has been stellar since Donald J. Trump was elected President of the United States. The Dow Jones Industrial Average is nearing 25,000, which is the highest level in history. Unemployment numbers are nearing near 3.0% which again is the lowest in history.

Unemployment numbers for women and minorities have been the lowest in many decades. Homeownership is rising and is the highest in two decades.

Homes are appreciating more so than any time in history. There are no signs of a housing market correction. The rising Housing Market nationwide continues to go up despite the highest mortgage rates since the 2008 housing bubble and credit meltdown.

Rising Housing Market And Shopping For Homes By Buyers

Many pre-approved buyers are facing trouble finding homes of their choice due to the rising housing market. Homes of their interest are being bombarded with multiple purchase offers.

This is not in any particular geographic area. It is common in all communities nationwide.

Over 62% of those renting feel rising housing market and homes in their community has escalated in the past 6 to 12 months. Over 40% of housing markets are less affordable today since June 2017.

This is often frustrating for first-time homebuyers who have a limited amount of down payment and closing costs to purchase a home. They have a certain amount of budget for their mortgage.

Any increase in purchase price means they need to cough up more monthly housing expenses and come up with more down payment and closing costs. Buyers in a hurry to purchase homes due to their lease expiring may try to find creative ways to finance a higher-priced home.

However, this can often lead to regrets and financial pressure when paying their monthly bills Buying more home than you can afford is not recommended.

We will discuss solutions in buying home in a rising housing market on this blog.

How Much Home Can You Afford

How Much Home Can You Afford

Consider your finances.

Your lender will pre-approve you on how much you qualify. However, the key is not how much you qualify but rather how much home you can afford.

Keep in mind that lenders will not take expenses like utility bills, educational expenses, child care, elderly care, entertainment expenses, and maintenance. Need to consider how much home you can afford and not how much you qualify.

How much home you can afford should be the basis of the home price you should consider during the rising housing market.

Factors To Take Into Consideration During Rising Housing Market

There are various factors home buyers should take into consideration when buying a home during the rising housing market:

30 year fixed rate mortgage versus 15-rate. Adjustable-rate mortgages versus 30-year fixed rate. Adjustable rates have lower mortgage rates than fixed-rate mortgages. ARMs are best for those who plan on refinancing or selling their home in five to 10 years.

In general, a house mortgage payment should not be more than 25% of the monthly net income. Amount of down payment: The more down payment the less the monthly housing expenses.

Reserves: All homeowners should have reserves for home repairs. The recent arctic blast that hit the Midwestern and Eastern states caused many homeowners thousands of dollars in furnace repairs and broken pipes.

Homeowners’ insurance does not pay for home repairs. Discuss finances with your spouse. Always keep in mind that homeowners can have emergency repairs like broken furnaces and air conditioning units. It is very easy to forget how much you qualify versus how much you can afford.

Always keep in mind how much you can afford and not how much you can qualify. What good is it to be a homeowner with no extra cash for entertainment, a budget to go out to eat on weekends, and not being able to afford furniture? Discuss with your real estate agent on your financial boundaries. 

Pay Down Monthly Debts Before Buying Home

You may pay off your car loan balance before you buy a home.

  • Paying off your credit card balances before closing on your home so your monthly debt payments are not as much is a great idea
  • Maybe you may want to save more money to put down to lower your monthly mortgage payments

These are considerations for home buyers before pulling the trigger.

Type Of Home Purchase To Match Your Budget

36 / 5000 Translation results Which house is right for me

Find out the necessities of a home.

  • For example, you may need a minimum of three bedrooms and two baths
  • Anything above these minimums may mean a higher price
  • Consider settling for an older home with outdated materials like formica countertops versus granite
  • Remodeling at a late time may be a compromise
  • You may find a better deal on homes near apartment communities and/or backing into commercial properties
  • Homes next to apartment communities and/or commercial zoning districts have lower prices than comparable properties in 100% residential areas
  • Homes facing busy roads have lower property values than homes in sub-divisions
  • Please consider the pros and cons when buying homes outside the box
  • Especially on resale value and how much more time it takes for it to be on the market before getting an offer
  • Never buy the most expensive home in the block

It is a bad investment and will affect resale value.

Get expert mortgage advice now. 

Property Taxes Are Huge Factors In Monthly Housing Payments

Unless you are a disabled veteran of the U.S. Military exempt from paying property taxes, all homeowners pay property taxes. Property taxes are different depending on the town and/or county. For example, I live in the Town of Brighton Wisconsin where my property taxes are $9,000 a year. For a comparable home, the property taxes two miles east of my home in the Town of Paris Wisconsin is $3,000. That is $6,000 less in property taxes which means a savings of $500 per month. $500 per month is equivalent to a $100,000 mortgage. Researching homes with lower property taxes can give home buyers more buying power.

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