Here’s what to do if you plan to buy a house in 2021

Dhara Singh Reporter January 8, 2021

As mortgage rates remain near record lows, this year may be the right time to buy a new home.

The average rate for the 30-year-fixed mortgage stands at 2.65%, dipping from 2.67% just a week earlier.

“If you are looking to purchase a home in 2021, you must be prepared to go to war,” said Steve Laret, owner at The Steve Laret Team, a real estate agency. “Inventory is at an all-time low … there is still a lot of money out there looking to take advantage of the historically low rates.”

As demand remains competitive, here’s what you should do, according to housing experts.

Get a pre-approval

You should consider obtaining a pre-approval letter from a lender confirming that you have a conditional commitment for a mortgage from a lender.

“This not only allows the buyer to potentially remove a financial contingency, but gives confidence to a seller that financing won’t be an issue upon closing,” Waller said.

Do a self audit of your finances

But before you get a pre-approval letter, look at your finances first. This is especially true of your debt-to-income ratio, which is calculated by dividing your monthly debt obligations by your pretax income. Lenders want a ratio of 36% or less.

“Even if you have strong credit, if your debt-to-income ratio is too high, you may have a difficult time getting pre-approved for the amount you need,” said Tyler Forte, CEO of Felix Homes, a real estate brokerage firm. “I recommend setting a strict budget and trying to use your savings to pay down some of your debt such as student loans, car payments or credit card debt.”

Leverage emotions

If you’re in a bidding war, tap your emotions to get the seller’s attention.

“A less commonly used technique that could be a key differentiator is writing a personalized (not a generic) letter, addressing the sellers and telling them why [you] love the home,” said Ryan Waller, real estate agent at Home Group Realty, a real estate listing firm.

Provide a larger deposit

To convince the seller you’re committed to the property, you may have to put down more than you previously intended.

“Where possible, have the ability to provide a larger deposit than requested (potentially even proof that [you] have already obtained it, like a picture) which demonstrates your seriousness and commitment,” Waller.