A couple of tech entrepreneurs living in Brooklyn are eager to trade up from the two-bedroom townhouse they rent. They’d love to stay in the same neighborhood, but yearn for more space to house their three toddlers.
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“They’re feeling incredibly smooshed in that townhouse. They want to buy a place with at least four bedrooms for the family, plus a garage so they won’t have to fight for street parking,” says Margaret Lebenson, the buyer’s agent they engaged to assist in their search.
Like nearly all purchasers, the Brooklyn couple confront major affordability challenges. With the move, they anticipate high mortgage outlays, along with substantial property taxes, as well as more maintenance, insurance and renovation expenses.
“Everybody wants a house at least 10% over what the bank says they can afford,” says Lebenson, who’s affiliated with the National Association of Exclusive Buyer Agents (naeba.org).
Though this couple has begun house hunting, they’re tempted to delay any purchase until late fall in anticipation of substantially lower mortgage rates. Why? Because many economists now expect the Federal Reserve to drop its rates at its September meeting.
“Frankly, I wouldn’t blame them if they sat on the sidelines for just a few more weeks to get lower rates. I’d do the same if I were in their position,” Lebenson says.
Still, she’s advising the couple to lay the groundwork for a housing transition.
“If you’re sure you want to move in a matter of months, it’s not too early to get started now,” Lebenson says.
Here are a few pointers for would-be buyers:
-- Seek the backing of a reputable mortgage lender.
Most lenders go to great lengths to ensure that the loans they originate are solid. That means borrowers must be well prepared to respond to their lender’s request for documents.
“The lender should tell you precisely what documents you’ll need for mortgage approval,” says Sid Davis, a real estate broker and author of “A Survival Guide for Buying a Home.”
As proof of income, many lenders now insist on more than the customary pay stubs and W-2s. For example, they’ll likely ask for at least two years’ worth of tax returns. Also, they’ll probably want proof that the funds for your down payment have been in your savings and checking accounts for some time and weren’t borrowed from your aunt just last week.
In addition, a good lender will provide you lots of guidance on how to overcome hurdles, like rectifying errors on your credit reports.
The time you spend documenting your financial fitness to buy a home is well spent if the lender gives you a preapproval letter, a vitally important tool as you negotiate for a property.
“Another advantage of preapproval is that it helps you define your comfort zone on how big a mortgage you can afford,” Davis says.
-- Don’t rush into home selection.
During the worst of the pandemic, many neighborhoods were short on available properties. But inventories are now gradually rising, and more would-be sellers are expected to surface in the near future. That’s why buyers now have more time to be choosy.
“You want to be open-minded. But you also don’t want to look for a level of perfection that’s impossible, because every house has flaws,” Davis says.
Having more choices is a positive for buyers, but not if it promotes perpetual indecision. Those who find themselves delaying indefinitely may wish to work with an agent to formulate tighter screening criteria.
“Start with a list of maybe 10 or 12 houses in the best neighborhood you can afford. Then gradually narrow that list to a shorter one,” Davis says.
However, he cautions wariness of any agent who tries to convince you to buy a place that doesn’t meet your core criteria, no matter how favorable the price.
“If an agent pressures you, stop working with that person and find another one,” Davis says.
-- Seek homeowners eager to sell.
Tom Early, an independent real estate broker, says that there are always some “test-the-market” sellers who have no urgent need to move. But there are also highly motivated homeowners who must move due to a job relocation, a financial setback or divorce.
“If a property is vacant, it’s likely the sellers are eager,” Early says.
Even if the home isn’t vacant, there are ways to assess the sellers’ level of motivation. Early says many owners and their listing agents are remarkably frank.
“You don’t need to pry, just ask why they’re moving, and they’ll open up,” Early says.
-- Don’t postpone a purchase beyond what is realistic.
Fear is a powerful factor that can stop people from realizing their home-buying plans, even when logic tells them to go forward.
Of course, there are legitimate reasons to postpone. Perhaps you have evidence your employer will soon begin a round of layoffs or that your spouse’s job is vulnerable. And it's not unreasonable to delay in anticipation of lower mortgage rates.
But absent such concerns, and assuming you’re sure that buying the right home is a good move for you from financial and personal perspectives, there’s no point in ruminating over what could go wrong, Davis says.
“[I]f your dream is to own a home of your own -- one where you could paint the family room lavender if that’s what your heart desires -- you might kick yourself later if you let worry stop you indefinitely,” Davis says.
(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)