POST TAGSMortgage News
Blog posted On March 29, 2022
In February, the median sales price for an existing home was $357,300 – a 15% increase from February 2021. The rise in home prices combined with higher mortgage rates, limited home inventory, and steep home buyer competition are stretching many buyers beyond their budgets’ limits. To stand out in a competitive market, many will make an offer well above the sales price. But how high is too high when it comes to an offer? Here are some factors to consider when making an offer in the current market.
When it makes sense to stretch the budget
Normally, it’s best to respect your budget and not overspend. Especially since you will likely have to save for maintenance costs and other homeownership expenses. But in certain scenarios, stretching your budget might work. “There are situations when I have told people it’s okay to stretch, but just understand the impact that’s going to have on other areas of your life,” said Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland said.
When you should be cautious about stretching the budget
If stretching your budget will inhibit other financial goals like paying off debt or saving for retirement, it probably is not worth it. “If the only way that stretch is going to happen is if they borrow from retirement money, I would probably say that doesn’t make sense,” said Cheng. She also suggested that buyers do not wipe out all of their cash savings in order to pay for a home. It also doesn’t make sense to stretch your budget so far that you can only afford it with tax breaks, said Cheng. Those benefits could go away in the future, which would put you in trouble.
Have you explored other options?
The current housing market is at a point where home prices are extremely high and so is home buyer competition. Although it may feel like you’re missing out if you don’t compete by overbidding on a home, it could save you in the long run. Overbidding the sales price of a home too high could put certain buyers underwater as home values cool off. If you can’t afford a home now without putting yourself and your budget in a bad position, it might be best to wait, search for alternative financing options, or talk to your loan officer about your options. We offer certain programs like Delayed Financing that can help you strengthen your offer with cash now and recoup those assets later. We also offer several 0% down payment programs and down payment assistance programs.
To learn more about our loan options, contact us!