The Home Buyer’s Road Map

Studies still show that the majority of Americans still see home ownership as part of the “American Dream”. In a 2017 Pew Research Center survey, 72% of renters said they would like to buy a house at some point. If buying a home is one of your goals, you probably know that preparation is in order. The home buying road map will help in explaining the process.

It’s a good time to buy a home. Here’s why:

• Interest rates have risen, yes, but historically, rates are still fairly low. The average mortgage rate for the last 40 years is around 7% (since people have been keeping track…since c.1971) Rates have been bumping around the low-to-mid 3’s for several years, now we’re seeing 6% to 7%.

• Home prices have decreased (2006 – 2010), bottomed (2010 – 2014), and are rising since 2014. When values are rising, it’s a great time to buy. There is some question as to whether values will continue to rise. Of course, we don’t know and don’t want to predict. What we do know is that demand is still high and inventory is still low in 2023…see our real estate trends page more recent statistics.

• There is a small, but good inventory of homes on the market to choose from. More homes come on the market every week.

Buying a home is one of the smartest purchases you can ever make. For generations, many Americans have used real estate as their first avenue of wealth-building. Building your own equity over years is one of the smartest and most likely ways to gain wealth, and it’s a very real hedge against inflation.

There are several things to consider before you buy your first home.

If you are a renter, then you have experienced increases in rent consistently. Inflation affects everything. With a 30-year fixed mortgage, there are no increases in your mortgage, like there are with rent. You can count on the same monthly payment, as long as you hold the mortgage.

Another reason is that home ownership can have positive tax implications, depending on whether you itemize or not. The three most important sources of tax savings for home owners are;

• deductions for mortgage interest

• deductions for real estate taxes

• capital gain exclusion for the sale of a principal residence – this is probably the most important aspect, imo, even if you don’t itemize and take the standard deduction.

Concerns About Interest Rates

Most people don’t track interest rates…not like a real estate professional does. If you look at the historical rate chart linked above, you will notice lots of ups and downs. That is the cyclical nature of rates. They have gone as high as 18% in the 80’s, and as low as 3% in the 2020-2021 years. They may never hit 3% again…who knows, but they will rise and fall, that’s certain.

Date the Rate, Marry the House. That is our latest advice to buyers. Even if it takes a few years for rates to come down, they eventually will, and you can refinance. In the time that you are waiting, most likely your home will accrue some equity, either from your monthly payments or from values rising, or both.

In economics, there are few guarantees, but in real estate there is one: if you wait on the sidelines, you will never build equity.

The Home Buying Road Map

Buying a home is not an event, it’s a process. That’s why its important to have an experience Realtor® along for the journey.

Helping first time home buyers navigate the process is one of our favorite parts of selling real estate in central Maryland. While there are several moving parts to the process, from negotiations to appraisals and inspections, it is always a joy for us to help people enter into home ownership.

The Home Buying Road Map

10 Road Signs Along the Way:

Although usually the home search is the fun part in many people’s minds, there are several steps that take place before and after the home tours.

1. Consult A Realtor – Starting your journey with a Realtor is a wise beginning. Use an experienced Buyer’s Agent to help along the way. A local Realtor® not only knows the neighborhoods and values, but can bring together a team of real estate professionals that can give you expert service. Your real estate agent will help you find the lender and loan product that works for your specific needs. A real estate agent will have a team of inspectors, title attorney, and service specialists to make sure all the pieces of the puzzle are there.
2. Pre-Qualification – With the recommendation of your agent, a credible, local lender will be your first stop on the road. Often with just a phone call, your lender can pre-qualify you for an amount that will guide you in your home search. Not knowing how much you can afford often leads buyers down an “imaginary road”, where they get their hopes set on something that they may not be able to afford, only to find disappointment. Equally important, the lender issues a Pre-Qualification Letter that is of utmost value when a buyer makes an offer. Without it, the sellers will not take the offer seriously.
3. House Hunting – Your local real estate expert will be invaluable in helping you navigate the local neighborhoods. An experienced buyer’s agent can listen to your wants and needs, and guide you to the neighborhood and the home that is right for you.
4. Making an Offer – A buyer’s agent will do an analysis of the current values, helping you know what the home is worth in the present market, with the level of interest and conditions. This will guide you to make an offer that will stand the best chance of acceptance, while keeping your best interests in mind. There are many parts to a good, strong offer, which include a good understanding of:
   a. Market Value
   b. Contingencies – Financing, Home Inspection, Appraisal… these are just a few.
   c. Time Frames
   d. Seller’s Motivations
   e. Loan Product
   f. Strategies – Many people don’t realize that there are strategies involved in reaching a “win-win” in the home buying process.
5. Negotiations – Negotiation starts before you even tour the home. That’s right. Then it continues until the day you close on the home, because anything can happen throughout the home buying process. The outcome of the home inspection, timelines, down payment, and many other issues will take negotiation as you move through the process. Experienced agents negotiate for a living. Put your agent to work for you.
6. Formal Loan Application – Once your offer is accepted, the clock is ticking. Your first step is to make a formal loan application. If you have started the process already by being pre-approved, you are one more step ahead.
7. Inspections, and possible Re-negotiations. The inspections can include the home inspection; well and septic inspections, if applicable; radon; pest inspection; chimney; and more. If these inspections reveal anything that needs to be repaired, these things have to be negotiated.
8. Appraisal – “The Second Sale” Any time you are financing a home purchase, the lender will require an appraisal. We call it the “second sale” because the home must appraise for the amount (at minimum) that the buyer needs to borrow for the contracted price. If the appraisal comes in too low, then there are more negotiations ahead.
9. Walk-Through – The walk-through is an important last step to make sure the home is in the condition that you contracted for.
10. Closing! Congratulations – Your agent can help you navigate the settlement process, coordinate the paperwork, wire transfers and last minute details of the transaction.

Most home buyers will purchase a home an average of once every 8 to 10 years. Your local real estate agent helps buyers and sellers every day, 365 days a year, with hundreds and even thousands of transactions accounted to their experience. Let that experience work for you as you embark on your home buyer’s journey!

Learn more about our Buyer’s Representation: 301-401-5119

For most Americans, purchasing a home is their entry to building wealth. It is also the entry to a lifestyle and to stability for a family. We can’t think of anything we’d rather be doing. Contact us for a guided tour of the home buying process.

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Chris Highland, Broker eXp Realty Maryland
Cell:  301-401-5119  Broker:  888-860-7369

*Typical home buying journey is just that, not a guarantee.