Dreaming of Home Ownership? The Millennials Guide To Buying in Arizona
A competitive market and record-high interest rates have finally made it impossible for millennials to purchase a home. We have created this guide to help you time the market, find the best loan rates, and ultimately achieve the dream of home ownership.
Get Ready to Buy
Even if you’re not yet ready to enter the competitive home-buying market, it’s always a good idea to be prepared. That way, once home prices decrease and interest rates level out, you’ll be among the first few to enter the market. You are getting ready to buy means getting your finances in order.
Now is the time to pay down high debt, such as credit card bills. It’s never too early to pull a copy of your credit report so you know what improvements must be made. Start saving now for a down payment. If you wait too long, you may miss the right time to buy while saving up for a down payment. In the meantime, avoid taking on any new debt. This includes opening new credit cards or taking out an auto loan. These actions can make it challenging to be approved for a mortgage later.
Research the Local Market
Being prepared also means having a thorough understanding of the real estate market in which you want to buy. Learn about the cities where you might purchase a home, including any desired neighborhoods.
In Arizona, home prices have already begun to level out, with the average home price decreasing by 12%. However, the number of listings also reduced by 5.5%. This means that home buyers in Arizona may still notice a competitive market, depending on where and when they buy.
Buy and Refinance
Some real estate experts suggest avoiding the timing of the market advice. The problem with waiting until home prices and interest rates drop is that millions of other Americans do the same. This means there is a very short period in which buyers will begin to flood the market again, thus driving the average price of homes back up.
Another option is to buy now and refinance later. You can refinance into better loan terms once interest rates level out as long as you maintain a good credit score.
Budget for Home Ownership
It’s never too early to begin budgeting for home ownership. This gets you in the habit of spending and saving as if you own a home. A few key differences between homeownership and renting is the maintenance cost. On average, you can expect to pay between 1%-4% of your home’s value each year in maintenance costs. Of course, this cost may vary, depending on the age of the house and its condition.
You’re also responsible for property taxes when you own a home. Property taxes also vary, depending on location and your home’s value. Arizona homeowners pay an average of $1,356 yearly for property taxes, based on a median home value of $187,700. Of course, you’ll also need homeowners insurance, but this is typically similar to how much you might pay in renter’s insurance.
Facing your finances head-on may be the approach to take if you’ve been unsuccessful in saving for a house previously. Make a strategy to finally get your finances in order, whether requesting arrangements or cutting down on essentials.
Research Your Loan Options
Many home buyers don’t realize that they can shop for home loans. Shopping for home loans lets you find the best interest rate and loan terms. Different home loan programs also have certain advantages and disadvantages.
For example, Federal Housing Administration or FHA loans typically offer more accessible credit qualifications, lower down payment requirements, and minimal to no down payment costs. An FHA loan also tends to have more lenient debt-to-income ratio requirements, making it an excellent option for borrowers with less-than-perfect credit.
Talk With a Mortgage Broker
It’s also never too soon to talk with a mortgage broker. A mortgage lender can help you explore your loan options and choose the right one. They can also review your credit report and make specific recommendations to improve your chances of being approved for a loan. A good mortgage broker also connects you to needed resources, such as a real estate agent specializing in your market.
Current economic conditions and an ongoing competitive housing market have stopped many millennials from buying homes. Homeownership is possible, even in today’s fluctuating economy and market. With the proper research, some preparation, and a knowledgeable mortgage broker, you can find your way through the current real estate landscape.
