If you’re looking to buy a house this year, it pays to start preparing early. Home prices reached record highs last year, creating one of the hottest sellers’ markets in recent memory. And with competition for listings still going strong, you’ll likely appreciate the extra time and space to plan.

Here are a few tips from home loan lender Mr. Cooper to consider as you progress your homeownership goals this year.

Decide if you’re ready to buy

Owning a home is a significant financial and personal investment. It brings immense advantages, like the opportunity to build valuable home equity and enjoy decent real estate appreciation rates (up to 4% yearly). But it’s also a big commitment, both financially and otherwise, and it’s one you should be sure you’re ready for.

While renting might feel inadequate for some, that could be just the thing you need based on your current life goals. Besides, homeownership comes with several obligations, from property taxes to monthly mortgage payments and more. So, take a moment to ask if a home purchase is right for you at this time. A good rule of thumb is to consider how long you intend to stay in the area. If your plan includes less than 3-5 years, you should probably reconsider a home purchase.

At the same time, it makes sense to do a credit score check and ensure you’re in the green. For most, buying a home includes applying for a mortgage, and your credit score will likely impact your chances of loan approval. This is because lenders will consider your credit in approving a loan – the better your credit, the greater your chances of successful application. But errors in your report, missed payments, or other issues can affect your score, making it seem worse than it is.

Acting now lets you spot these issues early and resolve them. Credit score changes can take time, so avoiding last-minute corrections allows space for any changes to reflect.

Consider the timing of your purchase

Timing can be the difference between paying over the odds for a house and finding a purchase that sits within your budget. It is natural to aim for a period when prices are low so that you can get more house for your money.

However, due to recent trends in the real estate market, timing your purchase right can be tricky. A mix of strong housing demand and low mortgage rates created a housing boom that benefitted sellers in 2021. And limited inventory continues to keep prices up, making it less likely that buyers will find “bargain” purchases.

Nevertheless, working with a professional realtor can provide the guidance you need. While some experts predict that home prices, which have maintained record highs, may fall this year, having a professional in your corner will be beneficial. They can help you understand the market’s direction long before it swings so you’re ready to pounce on your dream listing when the opportunity comes.

Prepare your offer in advance

Apart from the work you do preparing your mortgage application and finding great listings, your offer is the next most significant part of the journey. The quality of your offer is what determines if the seller will talk to you or reject your bid out of hand. That’s why it pays to consider the terms of your offer carefully.

How much cash are you willing to include in the bid? Do you have the financial bandwidth for a head-turning earnest money offer? Are there any contingencies you could waive to strengthen your bid? Thinking about these terms ahead of time allows you to develop a firm strategy in advance. It also helps you stay within your budget and resist the pressure of a bidding war.

But keep in mind that certain contingencies may be critical to your purchase. For instance, while a seller might appreciate you forgoing an inspection, you may get the house only to find hidden problems later on. Besides, an inspection can be a key requirement of the loan approval process. Your loan might not get approved if the house has hazards like faulty electrical wiring or structural damage. So make sure you’re not giving away what you can’t afford to.

Negotiate with the seller

If you have prepared a strong enough offer, prepare to listen to counters from the seller. Sometimes a seller might accept an offer that meets their desired points, but this is rarely the case. More often, the seller will probe to find your limits and identify what terms you’re willing to bend on.

But be careful here. If there are other buyers, the situation might devolve into a bidding war – which is rarely good news for buyers. This is where planning your highest offer in advance will help. Enlist the help of your agent to negotiate the counter and respond on terms that you feel you can shift on. You may be lucky to offer terms that the seller finds satisfactory, and then you can move on to finalize the agreement.

However, also have the courage to walk away if the seller’s demands start to stretch your budget out of shape. It won’t do to get your dream house and then get pressed for the costs of closing, moving, and subsequent mortgage payments.

Author's Bio: 

Alex is a professional writer and digital marketing expert