The First Time Home Buyers Journey
Buying Your First Home in MN | How to buy a Home in the Twin Cities
After reading our first post in this series, The First Time Home Buyers Journey – The First Step Begins with 3 Questions, you have answered all of these in the affirmative and are anxious to buy that home! Congratulations on your decision! The enthusiasm is great! Everyone should be excited about buying their first home but let’s take a deep breath and think about the next 3 steps – knowing the market, getting lender approval and selecting a Real Estate Professional.
The Twin Cities Metro Housing Market
First, let me say that as a first time home buyer I have good news for you. Second let me say, I also have some bad news. Let’s start with the good news. Interest rates are the lowest they have been in the last 3 years. Right now, with excellent credit, it is possible to get a rate as low as 3.5 percent. Want to hear more good stuff? You do not have to have a 20 percent down payment. As a matter of fact, with good credit, you may be able to get a conventional mortgage with only 3 percent down. Credit not so good or you still need down payment assistance? FHA might be the way to go. So now for the not as good news.
For anyone purchasing a home under $500,000, the twin cities is a seller’s market. The dynamic causing this is basically far more demand than supply, and the lower the price range the less inventory of housing you will find. According to data published by the Minneapolis Association of Realtors, May was the 18th consecutive month that pending home purchase activity outpaced the previous year. Closed sales rose 5.3% which is the highest closing figure for May on record. Due to this record demand, we saw the median sales price rise 5.7 percent to $236,826, second only to June 2006. Yet looking at inventory, of homes for sale at 13,372 units, down 20.6 percent from May 2015, the months’ supply of inventory is 2.7. With 6 months considered a market balanced between buyers and sellers, you can see how much the current market favors the seller.
Given those stats, you might wonder why the heck inventory levels of homes are remaining so low. Why aren’t sellers anxious to get a great price for their property in a relatively short time? The fact is that this situation of low inventory has many would-be sellers who may want to move up concerned about their chances of finding their next home on the other end of the deal in this competitive home-buying environment.
However, let me be clear that I still believe it is an excellent time to buy a home. I think it is a great idea to take advantage of current low-interest rates that will most likely not stay this low that much longer. And given the fact that property values are continuing upward, the sooner you become a homeowner, the sooner you will see your new asset increase. Knowledge is power and going forth to buy knowing what you are facing in the market will help make your search more productive and your offer more likely to result in a contract for a home of your own. Which brings us to the next step, having your finances in order.
Select a Local Lender - Get Pre-approved.
Given the current market conditions, I cannot overly stress the importance of getting preapproved for a mortgage before you begin seriously looking at homes. Now you might ask, doesn’t it make more sense to find a home first and then get the approval from the lender? The emphatic answer is no and here is the most important reason why. Given current market conditions, most desirable properties have an accepted offer in a couple of days or even less. Often the seller may have multiple offers. The bottom line is sellers in this market will not consider an offer from a buyer who may or may not be financially able to buy their home. A preapproved buyer has already been thoroughly vetted by the lender and found to be qualified to buy and approved for a loan up to a stated amount.
So shop around for lenders and rates. They do differ and one size doesn’t fit all in this case. There are many options available in the home mortgage market and interest rates can vary from bank to bank. If you are already working with a Realtor, they can recommend a couple to you as well. Remember you can have your credit pulled multiple times when shopping for a mortgage as long as it occurs in a 45 day period.
Once you have decided on a lender, he or she will tell you what documentation you need to fill out the loan application. After you complete that process, your loan will be reviewed by an underwriter and if approved you will receive a written pre-approval with conditions. At that point, you will know what price range to look in for your new home and when you find the one will be ready to have your agent draw up an offer that will instill confidence in the seller. Which brings us around to the buyers’ agent.
You Buyer - Need a Top Local Real Estate Agent
So now you are ready to start seriously looking for your first home. With your preapproval in hand, if you haven’t already found a Real Estate professional to work with you now is the time. Even if we were in a buyers’ market getting an agent is the best plan but in this seller’s market, it is essential. An experienced Real Estate Professional will not only know the Twin Cities Metro communities, they will know the neighborhoods and can help you zero in on searching for homes in the area that will meet your family’s needs.
A Realtor can point out advantages and disadvantages of particular properties, assist and advise you in making your best offer and increase your chances of securing the home you want. He can recommend professionals you will need along the way such as home inspectors and contractors. He can be your mentor and guide. If you need some tips in selecting an agent, please read our post, Do You Know a Super Real Estate Agent When You Meet One? It’s fun and has some very good information.
Keeping in mind that the twin cities real estate market, fueled by low inventory balanced again high demand is moving at the speed of light, means buyers come in two varieties, the fast buyer and the no buyer. I know you want to be the fast buyer so you have power in your knowledge of the market characteristics, your pre-approval letter in hand, and a Super Real Estate agent by your side, like Joe Houghton and you are prepared and ready to go! Buying a home should be an exciting and rewarding experience and with the proper advice and assistance along the way it can even be fun. Happy house hunting Twin Cities!
Start looking for your dream house using our state of the art search engine which allows you to search by every parameter imaginable. If you find a home you would like to tour, or if you have any questions please give Joe Houghton a call. Nothing gives Joe more pleasure than helping a first-time buyer realize his or her dream of buying that initial home.