Wednesday, July 8, 2015 / by Bill Berning*
How much house can you really afford? Is the market in the right spot for your budget? If these and other similar questions are running through your mind, don’t worry – you’re in good company. More and more buyers are trying to stretch their budgets farther, but most don’t understand the right way to accomplish this goal. To find out how best to go about this approach, let’s spend a little time talking about how you can make the most out of your savings and equity in a buyer-friendly market.
Buying a home is far from an easy affair in most cases. However, working on a budget – and not having a strong plan of action to get the most out of your assets – adds unnecessary layers of difficulty to the process.
Making the right call on a home requires a lot of consideration – even in a buyer-friendly market. Figuring out if the neighborhood is good enough for your family, how close schools are for the kids, and a lot of other concerns all deserve a reasonable spot in the conversation. Unfortunately, it’s hard to properly address these issues if you’re forced to work within the constraints of a budget that’s far too strained. With this in mind, here’s a few tips and tricks that can help you lessen the burden of an overworked budget and ensure that don’t get locked out of your dream home.
What Exactly Is a Buyer’s Market?
Before getting too deep into the discussion, it’s important to cover exactly what a buyer’s market is, and why it’s the best possible time to acquire a new home. As the experts over at Investopedia point out, the reason why buyer’s markets are so favorable to shoppers like yourself all boils down to supply and demand.
Essentially, this market situation represents an excess of viable housing options, thus giving you – the buyer – more leverage than that owned by the overabundance of sellers. Working with your realtor and gauging the current amount and quality of homes in your area can help you lock in on when to make a move into a buyer’s market that’s in full swing.
Step One Starts with Your Credit
Before you rush off to start viewing homes – or if the market isn’t in quite a favorable position yet – Michele Lerner of Bankrate.com suggests focusing on your credit. It’s no big secret that the best way to extend and enhance your budget or approved loan amount comes with raising your credit score as much as possible.
While it might not be the most dramatic tip or tactic ever offered up, it’s a variable that’s well within your control when you start breaking down the home buying equation. If you can reduce overall debt, pay down outstanding loans, and build a positive track record with your creditors, then walking in to the bank and getting the mortgage amount that you need moves away from the realm of wishful thinking and much closer toward reality.
Get Tough on the “Must-Haves”
Another smart tactic to employ when you’re working on a budget comes in the form of doing a home needs audit. Yes, it’s nice to have lofty goals for your dream home, but being realistic and hitting on the essentials first is the best way to get the most out of a new home in a flexible real estate market.
Do you really needed a heated pool? What about the four-car garage? Trimming down on these excessive features now can help put you on a path that leads to a better overall home later. As your budget expands down the road, you can start to worry about these luxuries. Until then, focusing on finding the right amount of living space, a good location, and the other essentials can help you squeeze the maximum amount of value out of your budget in the present.
Explain Your Needs to Your Agent
If you’re feeling a little overwhelmed by the balancing act that goes into trying to take advantage of a buyer-friendly market and staying on budget, Money Crasher’s Valencia Higuera points out that there’s nothing wrong with reaching out for a helping hand. Specifically, Higuera suggests giving a call to your trusted real estate agent.
By connecting with a person who’s been around the block plenty of times – both literally and figuratively – you can hone in on the homes that fit your needs and constraints, all while saving yourself from a few unnecessary headaches and sleepless nights. In some cases, this expert can even clue you in on potential homes you might have missed that can fit your needs, as well as other ideas that help you get even more out of a beneficial real estate market.
Be Creative with Your Potential Home Choices
The whole point of entering a buyer’s market on a budget is to utilize approaches that go against the grain, so don’t put any limits on your ability to think outside of the box. Exploring the possibilities held within fixer-uppers, looking for homes that haven’t generated much interest (and therefore command far less terms of price), and even trying your hand at foreclosure auctions are all examples of this method.
Naturally, you’ll want to move forward with caution and patience to avoid unnecessary hang ups – like a protracted bidding war on a home. However, if you can find the happy medium between these precautions and a willingness to embrace new opportunities, experts like Higuera note that the sky’s the limit in terms of purchasing power potential.
Don’t Worry about Anyone Else
When you’re finally ready to start putting these tips to good use, there’s one last thing you need to consider before sending out offers and inquires: Don’t worry about what everyone else thinks. At the end of the day, Higuera explains that comparing yourself to others simply isn’t a viable way to accomplish your real estate goals.
Working on a budget or dealing with a smaller approved loan amount than you expected isn’t anything to feel bad about; it’s just the way things are for some homebuyers. Once you embrace this willingness to relax and work with – and not against – your budget, there’s nothing that can stop you from finding a home that fits your needs, especially when the market favors you and other buyers.