Low mortgage rates, states reopening ignite home sales, bidding wars
from the NAR. That’s up from the prior month, when inventory was at just a four-month supply. But it’s still far too little.
“New home construction needs to robustly ramp up in order to meet rising housing demand,” Yun said. “Otherwise, home prices will rise too fast and hinder first-time buyers, even at a time of record-low mortgage rates.”
All of this means that buyers in many markets could face heavy competition as they vie for homes this summer.
“It seems like every desirable home has multiple offers,” says Becker. “Sellers are selling their homes in days, not weeks. I am seeing buyers offer over the listing price, have escalation clauses where they will beat any other offer up to a certain price, and drop their requests for the seller’s help.”
That competition, he notes, is making it tough for first-time homebuyers, who may need down-payment assistance or closing-cost help because their offer is less attractive than others who don’t request or need
assistance.
Here are a few things that can help you compete in a hot market, according to Becker:
Get preapproved for a mortgage rather than scramble to get your lender documents once you find a home.
Not all homebuyers will be able to get in on low mortgage rates.
“Borrowers who are getting the best rates are those with strong credit,” says Becker.
According to a recent report from the Urban Institute, borrowers with credit scores above 720 are receiving mortgage rates 78 basis points lower than those with scores below 660. The spread is even wider in the nonbank space.
If you have less than 20% for a down payment, having solid credit can help you get lower private mortgage insurance rates as well, says Becker.
Those with less-thanexcellent credit still have options, but it isn’t as easy to qualify as it once was.
For example, Becker says that many lenders have raised the minimum credit score for FHA loans to 620. Prior to the pandemic, his brokerage would take a score as low as 580.
If you can’t get a loan or the mortgage rate you want, take steps to improve your credit.
“Borrowers just need to have a plan of action for the future if they don’t qualify now,” says Becker. “Remember, no doesn’t mean never.”