It’s been quite a year for families seeking to buy a home. Interest rates are up, available housing supply is down, and when it comes to finding the perfect home, competition is fierce.
Factors like these can make the process of buying a home seem daunting in any market – and those pressures can feel even more pronounced within minority communities where systemic barriers have made it more difficult to achieve and sustain homeownership.
But a tough housing market doesn’t mean the dream of homeownership is out of reach – or that the benefits of owning a home are any less significant. When it comes to achieving your financial goals via homeownership in this housing market, time spent planning and preparing can give potential homebuyers a big leg up when the time comes to make an offer on that perfect home.
A few simple steps can help would-be homebuyers navigate the challenges presented by today’s market.
First, take time to think about what you want – and what you need – out of a home, especially given how our individual perceptions of “home” have evolved over the last two years. In a market as competitive as today’s, it’s important to know ahead of time where you’re willing to make trade-offs and where you’re not. If you’re a remote worker, maybe space for a home office is more important than proximity to a corporate office. Maybe your pandemic puppy is growing and needs more space, so a nice yard takes precedence over walkable restaurants.
Understanding the difference between “nice to have” and “need to have” has always been important. In today’s market, it’s essential to know where you stand before you look.
Next, it’s crucial to know ahead of time what you can afford and have a plan for financing. While it may seem like a no-brainer in any market, the current environment is so competitive that those without a strong understanding of their budget – and ideally pre-approval from a mortgage lender – may be at a disadvantage when bidding for their dream home.
Homes for sale are often flooded with interest within days of being listed, and it’s becoming increasingly common to see all-cash buyers swoop in with an offer above the asking price. Taking the time now to establish your budget, determine how much wiggle room you have, and begin the process of securing pre-approval can provide buyers a serious head start when the perfect house comes along.
Finally, as you work with a lender to seek pre-approval, make sure to ask lots of questions and have a detailed discussion about your goals and your current financial situation. Your mortgage lender may be able to share information about programs that could help you bring your goals closer to reality through programs that help address some of the factors that can make homeownership seem less unattainable to some potential homebuyers.
At Wells Fargo, for instance, Home Mortgage Consultants can provide information about programs like the Dream. Plan. Home.SM mortgage, which offers low- and moderate-income families a down payment as low as 3% and supports approval of those with non-traditional credit. The Dream. Plan. Home. closing cost credit—currently available in eight markets—may provide up to $5,000 towards non-recurring closing costs making it easier for low- and moderate-income families to purchase a home.
Programs like these can make a real difference for eligible homebuyers. They can also play a role in helping to address some of the systemic inequities that have prevented too many minority families from achieving their homeownership and wealth-building goals.
As the largest bank home mortgage originator, and largest bank originator of home loans to minorities over the last decade, we at Wells Fargo believe we have a responsibility to develop solutions that help advance racial equity in homeownership. That’s why, in addition to programs like Dream. Plan. Home., we’re also launching a Special Purpose Credit Program intended to help eligible minority customers whose mortgages are serviced by Wells Fargo to refinance.
Wherever you are on your financial journey, it pays to be prepared. That goes double in today’s tight housing market. If you’re ready to take the next step, make sure to take the time upfront to determine your needs, establish your budget, and understand the programs that could help make the dream of homeownership a reality for you.