Winter is typically not the best season for home sellers, but a good season for buyers. That may not be the case this winter, though. With the current low inventory and keen buyer competition for for-sale homes, this winter is shaping up to be more of a seller’s market than ever before. Winter buyers, then, need to prepare in order to be competitive. So here are 5 things to do right now to prepare to buy a home in Miami this winter.
1. Get Your Credit in Order
Probably the first thing you should do to prepare to buy a home in Miami this winter is to check your credit and get it in order.
Once you decide to buy a home this winter, experts say, “the first thing you’ll need to do is check your credit history. This involves pulling credit reports from each of the three credit reporting bureaus (Experian, TransUnion, and Equifax) to better understand your credit score. Your credit score determines whether you’re eligible for a mortgage, and it influences your mortgage rate. The higher your score, the lower your rate.”
It’s best to check your credit score at least 6 to 12 months prior to applying for a mortgage. This will give you time to improve your credit score if you need to. Also, be sure to check your credit report for any errors that lower your score because they do happen. And then work on getting those errors fixed, which is a quick way to increase your score.
2. Lower Your DTI Ratio
A related thing to do to prepare to buy a home this winter involves lowering your debt-to-income (DTI) ratio.
The DTI ratio is basically “the percentage of your monthly gross income that goes toward debt repayment. Mortgage lenders use DTI to see how big a house payment you could afford. Typically, lenders prefer a DTI ratio that’s no higher than 36% to 43%, depending on the mortgage program.”
Some lenders will allow a higher DTI ratio, but only if there are “compensating factors” in play, things such as a very high credit score or large cash reserves. Most buyers, though, will be better off lowering their DTI ratio, and most of the time this means paying off as much debt as possible – car loans, student loans, credit cards, and so on – before applying for a mortgage loan.
3. Start Saving for the Down Payment and Closing Costs
And start saving for the down payment now to buy a home in Miami this winter. Most conventional loans require at least 3% to 5% down, but experts recommend that you pay 20% of the purchase down in order to avoid having to pay for private mortgage insurance (PMI).
“[I]f the purchase price for your first home is $300,000, you may need at least $9,000 to $15,000 as a down payment. You’re also responsible for closing costs – which are roughly 2% to 5% of the loan amount (or $4,000-$10,000 on a $200,000 loan). When applying for a mortgage loan, your lender will ask for copies of your bank statements to confirm you have enough cash reserves for your down payment and closing costs.”
4. Get Pre-Approved Soon
Another thing you must do to buy a home is to get pre-approved as soon as possible. When you have a pre-approval letter in hand, sellers will see you as a serious buyer, and you’ll have more negotiating leverage.
According to industry pros, “[g]etting pre-approved for a mortgage and securing financing are an essential first step when buying a home. It gives you a clear picture of how much house you can afford and lets you make an offer as soon as you find your dream home. . . . [T]his process is more important now than ever. . . Buyers need to be ready to buy a house before they start looking.”
If you’re not sure how to go about getting pre-approved, you can consult a Miami agent for some guidance. Just call 706.870.1496 to discover more.
5. Find a Good Miami Agent
One of the best steps you can take to buy a home this winter is to secure the services of an experienced local agent, an agent who knows the local market inside and out “Buying a home can be a complicated, intimidating process, so you’ll need a professional on your side to answer questions and look out for your best interests.” And a good agent can help you get the best deal with her honed negotiating skills.
But finding a good agent is often a long, labor-intensive process. It typically involves soliciting recommendations from family and friends and then reading reviews and then interviewing prospective agents. But a quicker and better way is to go straight to an agency known for its skilled, experienced agents. So if you plan to buy a home in Miami this winter, contact us today at 706.870.1496.