Buying a home in a sellers market

Stretching Your Dollar
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INDIANAPOLIS, Ind. - If you're thinking about buying a house, home prices are going up fast and mortgage rates are also inching up.

New numbers out for January reveal home prices went up 6.4% from the month before! But there are ways to save on buying a home, and there are methods to use to sell a house, too.  Spring is one of the biggest times to sell a home or buy one, if you can.

"My husband and I have been searching for a home for some time.  There were multiple times that we tried to see a house that was for sale, but even the same day it went on the market, it was already gone," said prospective home buyer Katie Hunnicutt.

That was just one example from a person trying to buy a home here in central Indiana.  The good news for Hunnicutt is that she and her husband have made an offer on a home and it's been accepted.  It's not a done deal until closing, but it's hopefully just a matter of time. If you're in the market to get a house or are even considering it, act now. Mortgage rates have gone up almost 2 percent from their low less than 2 years ago.

"Interest rates will go up.  If we're at a 4.5% now, it's not going to be out of line to think they're going to be 5% by the end of the year and then moving into the 5's by 2019," said Brett Young, a realtor with Remax Legends Group.

One percentage point for an interest rate doesn't sound like a big deal, but it does make a big difference in the total price of a home.  Here's an example using an on-line mortgage calculator.  A $250,000 home with a 30 year mortgage, at 4% will cost you more than double its price.  The total would be $524,000 when you're done paying it off.  If the rate goes up to 5%, it will cost you $576,000 at the end of 30 years.  That's $52,000 more with just a 1% mortgage rate increase.

Another money and time saver is to get your financing pre-approved, so you know what you can afford.  The more interest rates go up, the less buying power you have.

"Let's say your bank or lending company says you can qualify for a $250,000 house today.  But by the time summer comes around, if interest rates go up, you might only qualify for a $225,000," said Young.

If you’re trying to buy a home, you need to be prepared and you'll likely need to act quickly because home inventory is low here in central Indiana, and almost everywhere in America.

"It's a fast-paced situation for sure.   When anything goes on the market, it's often gone in 24 to 48 hours, it seems.  Anything that would be a good buy doesn't stick around for long," said Shelby Meerhoff with Remax Legends.

For people looking to buy, get a realtor or a mortgage pro to check your credit score because it could be wrong.  And that could affect what you qualify for.  There might be incorrect information on the report you'll have to dispute or there's the possibility that the reporting companies can have you confused with someone else.

"A mortgage pro can take a look at your credit report without it hurting your credit rating.  They can also give you a good idea where you stand because if you do have a common name, there could be someone in another state that had a credit problem and somehow it got on your credit report.  And that can take 60 to 90 days to get cleared out of the way so you can go buy that home," said Young.

Even though it's a sellers market, consider using a realtor.  Most homes sold by a pro net 10% to 15% more than homes sold by an owner.  Staging a house with furniture also makes a big difference in how fast a home sits on the market.  Empty homes don't sell as well.

It's important to note, even though interest rates are going up, most young buyers don't realize how high they were at one time.  Young noted that back in the 70s and 80s, it wasn't uncommon to get an interest rate of 17% or 18%!

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