Is This the Best Time to Buy a Home?
I often get asked about the best time to buy a home….
This specific time of the year brings with it a unique opportunity for a new home buyer to take advantage of a perfect storm for buying a home.
- The Best Time to Buy a Home?
- The Perfect Home Buyer Storm
- Lucky Home Buyers get the Best Deals
- Working with Professionals
The Best Time to Buy a Home?
If you’re asking most real estate professionals, you’ll hear that NOW is the best time to buy a home! And it’s the same answer every time, no matter who asks, or when you ask.
My default answer is very similar, and typically suggests that the benefits to owning a home are overwhelming.
Buying a home instead of renting is a great way to fix your housing costs, save money, and build long term wealth. The best time to buy is as soon as you are able to.
So, other than ANY time being a good time to buy a home, there is something unique about this time of the year.
The Perfect Home Buyer Storm
There are two really big advantages that some home buyers will have around this time of the year.
- Income Tax Refund
- Calm before the Buying Season Storm
Income Tax Refund
Minimum down payment for a first time homebuyer can range anywhere from no money down, with VA or USDA home loans, to 3% with Conventional HomeReady and Home Possible, or 3.5% with a FHA home loan.
Depending on where you are in the Country, this is not a large amount by any means. Especially if you have savings already, or have access to gift funds to help with your down payment or closing costs.
Your income tax refund could either cover your down payment, or at least contribute to your ability to take the plunge into homeownership. In many cases, it could take months, or years to save that much money. Put that refund check into the best long term investment you can make, owning your home.
In most cases, the money you use for down payment and closing costs must be sourced and seasoned. That essentially means that the money has to have been in your account for 60 days (2 monthly statements). That is your seasoned funds to close.
If there is a large deposit in the most recent 60 days that brought the account up to the minimum needed to close the loan, it needs to be sources.
This just means that the lender has to verify that the money is coming from an approved source, like a gift, transfer from another account you own, or other acceptable sources of funds that do not need to be sourced and seasoned.
Tax refunds do not need to be seasoned if you show proof that the money was your refund amount. You can use your tax refund for the down payment on a home the day after you get it!
Calm Before the Buying Season Storm
In the real estate world, it is often called “The Buying Season” in the months between when most public schools get out, and the beginning of the new school year.
Most families with children in school do not want to pull kids out, or stick kids in a new school during the middle of the school year.
The most common experience a home buyer will have during these months is that home prices will rise, and the competition will be fierce. Everybody has chosen that time of the summer to buy a home.
Springtime is the calm before this storm. When you combine this timing with the small windfall that you might receive as a tax refund this year, it might be the best time for you to buy a home!
Lucky Home Buyers get the Best Deals
There is a common quote that says “luck happens when preparedness meets opportunity”. I’ve heard several versions of this quote over the years, but it has never been more true.
Any time you’re looking at a potentially competitive situation, you need every advantage you can muster. In spring of 2019, at least what I am seeing in my Mortgage brokerage in California, many markets are moving into, or already are buyers markets.
Real estate is a supply and demand market. A buyers market is when there are more homes (supply) on the market than buyers (demand). A sellers market is when there is more demand (buyers) than there is supply (sellers).
Home values rise on average, between 3-5% a year conservatively. The majority of this price increase for a home owner is always realized during the summer months. The demand for housing drives up home values for sellers, and home prices for buyers.
How do you get lucky? You must be a prepared home buyer.
You must be prepared with a pre-approval from your lender. Your pre-approval letter is your blank check that will allow you to move quickly if you find the home of your dreams.
Once you are pre-approved for your home loan, there are a couple of other strategies that can use if you are working with professionals that are experts in their area of practice.
- Seller Concessions – While in a buyers market, you can have an increased opportunity to use creative offer strategies, and ask the seller to pay some, or all of your closing costs. Closing costs are typically 1.5 to 2% of the loan amount (not purchase price).
- Seller Paid Discount Points – Seller paid discount points is an advanced strategy that i’ve written about in much more detail. In a nut shell, instead of using seller concessions to pay your closing costs, you’re using it to permanently buy-down your interest rate.
Working with Professionals
I can not emphasize enough the importance of hiring a professional, experienced Realtor and loan officer when selling or buying your first home.
When you call a lender from a TV or radio commercial, or click an ad you saw on the internet that has a catchy headline, you are playing competence roulette.
I personally have been in the business for close to 20 years, and started this website 10 years ago to educate and empower consumers.
We have had over a million consumers visit this website and I have answered many thousands of questions from folks all over the Country.
If you are outside of California, I can introduce you to a loan officer from our Expert Network that I personally know and trust.