How do you determine your buying power as a Buyer? Hi, I’m Krista Mashore with Homes By Krista and eXp Realty. Home shoppers often ask me, what should I do in today’s market? Should I wait to buy or take advantage of the lower prices and more inventory despite higher mortgage rates?
My answer is: If you can financially take advantage of this market, then yes, you should buy now, and here’s why. In today’s market, buyers have all the leverage to negotiate with sellers. Most homes on the market today are sellers who need to sell, not just looking to see what price they can get on their homes.
This means they may be more willing to offer more concessions like closing cost credits, rate buy-downs, or repair costs. More importantly, sellers are no longer asking buyers to remove all their contingencies with an offer like we have seen the last couple of years.
Combining all of this together gives a buyer more power and leverage to purchase a home and can outweigh the costs of high mortgage rates. In fact, right now with creative financing options, it can actually be more affordable to purchase a home than it has been in the past few years. Also, after purchasing, buyers can always look into refinancing when rates eventually come down.
Determining your buying power as a buyer involves understanding your financial situation and what you can afford in terms of mortgage payment and other associated costs of owning a home. There are a few key factors that you should consider when determining your buying power:
Your debt-to-income ratio: Your debt-to-income ratio (DTI) is the number of your monthly debt payments divided by your gross monthly income. Lenders use your DTI to evaluate your ability to repay a mortgage. A lower DTI can increase your buying power, as it shows that you have more disposable income to put towards a mortgage payment.
Your employment and income history: Lenders will want to see that you have a stable employment and income history, as this can affect your ability to make mortgage payments in the future. A longer employment history and a consistent income can increase your buying power.
Other factors that can affect your buying power include the type of mortgage you qualify for, the current market conditions, and the specific property you are interested in. It is important to work with a lender to understand your options and determine your buying power before you start the home-buying process.
It is also a good idea to get pre-approved for a mortgage before you start shopping for a home. This will give you a clear idea of your budget and help you to focus your search on properties that you can afford. Pre-approval is also useful when it comes to making an offer on a home, as it shows the seller that you are a serious and qualified buyer. It is important to remember that pre-approval is not the same as pre-qualification, and pre-approval is generally seen as a stronger indication of your buying power.
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