Buying a home is a learning experience. This is especially true for first-time buyers trying to navigate mortgage rate forecasts, but even seasoned buyers tend to learn at least a few lessons with every purchase.
Be Aware: 5 Types of Homes That Will Plummet in Value in 2024
Discover More: 4 Genius Things All Wealthy People Do With Their Money
Surprises will still crop up during the buying process, but starting as informed as possible gives you an advantage. Whether you’re competing for your dream home in a market with little inventory or working with a lender to get pre-approved, knowledge is power. This isn’t a process you want to rush into, so take your time.
Here’s a look at six surprising facts about buying a home in 2024 that you need to know.
Prices Might Not Slow Anytime Soon
If you’re waiting to buy in hopes of a price drop, you might stay put for quite some time.
“Home prices increased just over 5% this past year according to the CPI, which is down from last year’s peak of 8%, but still very high with no signs of slowing,” said Jared Blumberg, a licensed real estate salesperson and co-founder of the Blumberg Werner Group at Compass, based in New York City. “Should interest rates eventually come down, which is expected, I would think we will see prices rise even more as homes become more affordable.”
Specifically, the median U.S. home sale price was $420,401 in March 2024. This represents a 4.8% year-over-year increase from March 2023, when the median U.S. home sale price was $400,980.
Most Real Estate Markets Are Still Growing
“I think many people feel the housing market is at or near its peak, but all the best indicators we have for future value seem to indicate there’s still room to grow in most markets,” Blumberg said. “There are certainly a select few areas that had major Post-Covid booms currently with a surplus of inventory that would be exceptions to this thought.”
For example, if you’re looking to buy in Florida or Texas, you might be in luck. Out of the 10 metro areas with the largest year-over-year increases in supply, six were in Florida and two were in Texas, according to a March 2024 Redfin report.
Specifically, in Florida, the areas of Cape Coral (51%), North Port-Sarasota (48%), Fort Lauderdale (30%), Tampa (29%), Orlando (23%) and West Palm Beach (20%) had the largest year-over-year increase in homes for sale. In Texas, McAllen (25%) and Dallas (20%) realized the most notable supply increases.
You Don’t Need a 20% Down Payment
“I find that a lot of my first-time home buyers have a misconception that a 20% down payment is required to purchase a home,” said Melissa D. Rubenstein, a realtor-associate at Corcoran Infinity Properties, based in Alpine, New Jersey. “You can generally purchase for as low as 3% down, but it’s important to weigh the potential costs of doing so — fees and insurance on the mortgage,” she said.
Try This: I’m a Real Estate Agent: Buy Property in These 5 Fast-Growing Cities To Be Rich in 5 Years
When you don’t have a 20% down payment, you generally need private mortgage insurance or PMI. This is a monthly fee rolled into your mortgage payment.
The specific amount you’ll be charged varies, but expect to pay around $30-$70 per month for every $100,000 borrowed, according to Freddie Mac. Therefore, if you borrowed $400,000, you might pay $120-$280 monthly in PMI.
Taxes and Insurance May Not Have to Be Part of Escrow
“You don’t always have to escrow for taxes and insurance,” Rubenstein said. “When receiving the disclosures from a lender before closing, there is usually an escrow set up for taxes and insurance.”
When added to the other costs of buying a home, this can be a lot.
“This can be thousands of dollars, in addition to title and other closing costs,” she said. “If you’re putting down over 20%, your lender may allow you to waive the escrow and pay property taxes and homeowner’s insurance on your own, instead of through an escrow.”
Spend Wisely Before Applying for a Mortgage
You want to look as good as possible to potential mortgage lenders, so don’t do anything to jeopardize your chances of both getting a loan in general and a competitive rate. Before deciding whether you’ll be approved mortgage lenders will review absolutely everything about your finances — including recent spending activity.
“Don’t make major credit card purchases in the months before applying for a mortgage,” said Ralph Herrera, a senior real estate advisor at Engel & Völkers, based in Atlanta(3).
The reason for this is two-fold, as both your credit utilization ratio and debt-to-income ratio can take a hit with a major purchase(9).
Your credit utilization ratio refers to the total amount of credit you have, versus the available balance. This directly affects your credit score(9).
Your debt-to-income ratio is the amount of money you owe, in relation to your earnings. This is a key factor when deciding whether to grant you a mortgage(9).
Choose Your Lender Wisely
If you think it doesn’t matter which lender carries your mortgage, you’re mistaken.
“Your mortgage lender matters, [so] shop around and compare costs [versus] benefits,” Herrera said. “A good Realtor will be able to recommend mortgage bankers and brokers.”
Performing careful due diligence is important because failing to do so can cost you a lot of money. You need a lender that is completely transparent about your interest rate, closing costs, property taxes and any additional fees you’ll pay at closing or factored into your monthly payment(10).
Mortgage terms can also vary by lender — i.e., a conventional fixed-rate mortgage, adjustable rate mortgage, FHA loan — so you need a company that works for you. Some lenders also offer options like the ability to purchase mortgage points — i.e., essentially buy a lower interest rate at closing — or score a mortgage rate lock, so choosing wisely can pay off.
More From GOBankingRates
This article originally appeared on GOBankingRates.com: 6 Surprising Homebuying Facts That You Probably Didn’t Know
Signup bonus from
