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Kim’s Home Buying Tips

Money Smarts with Kim

Looking to start the new year under a new roof, but having trouble locking one down? Look no further! Our President and CEO Kim Sponem talks about what to do in a low-inventory real estate market and how to prepare yourself when the time is right.

We are trying to buy our first home and it seems like everything we look at is going really fast. Do you have any tips for us?

You’re experiencing what many other buyers are also experiencing—a low-inventory real estate market: one with high demand and fewer homes for sale. There are different theories as to why this is happening now. Some say new construction needs to pick up. Also, baby boomers don’t seem to be moving out of their homes in the number expected after kids have left home. And, after the global financial crisis, many people improved their homes rather than move. Now they are enjoying the upgrades. Any and all of these factors, as well as others, may play a part in the low-inventory market.

Before doing anything, it’s very important to get preapproved for financing. This includes having a lender run your credit report and verify your income and assets in order to provide a purchase range that will comfortably fit into your budget. With preapproval, you will be able to provide a stronger offer and have an edge over purchasers who haven’t taken this step. At Summit, we provide thousands of homebuyers with this document, so shopping is much easier.

Besides homes going fast, you’ve probably also noticed that buyers in this competitive environment are more likely to make offers that are over the asking price to increase their chance of getting a home. Here are a few pitfalls to be aware of if you are considering doing that: 

  • If the home does not appraise out at the level of the offer, you may need to put more money down. Have a good understanding of what your remaining cash is once you increase a down payment.
  • The more you pay for a home, the higher the taxes will be; so, you can’t just look at what the current owner is paying for property taxes. This is an ongoing cost to take into consideration.
  • If you make an offer out of your budget, you could find yourself in a tight financial spot moving forward. Be disciplined and stick to the amount for which you are preapproved.
  • Your monthly payment may be higher than you planned, putting you in an uncomfortable budget situation. Consider your discretionary spending so you can still enjoy doing the things that make you happy.

What are some things you can do to make sure your loan goes through in a low-inventory market?

  • Get preapproved, and fully understand your options. I’d recommend starting at Summit Credit Union, Dane County’s number one mortgage lender.* You can connect with an experienced mortgage loan officer through Summit’s free mobile app, CURB. In CURB, you can search properties and get immediate payment information for a variety of mortgage options.
  • Have a good understanding of your price range. In this market, you likely won’t be able to come in much lower than the asking price. When shopping, look for homes that fall in the mid-range of your budget so if you need to go above asking price, you are not over the range and it still fits your budget nicely.
  • Make sure you understand the down payment requirements for your mortgage, and build in a cushion for things you’ll need once you move in.
  • If you’re currently saving for a down payment, save more than you think you’ll need, so you’ll be in a stronger position.

And finally, be patient. You will find your home. We work with a lot of great Realtors who can help you narrow your search and help you with the process. Good luck, and remember to have fun. Buying a new home can be a lot of fun!

*#1 mortgage lender based on number of mortgages recorded with Dane County register of deeds.