In recent months, the demand for new homes has skyrocketed – but although the housing market is hot, there’s no need to panic. Experts say there’s a light at the end of the tunnel, and in the meantime, you can take several steps to prepare for a near-future purchase.

Jackie Windham, Senior Vice President of Mortgage Lending at SouthEast Bank, explained how prospective homebuyers can continue to make progress on their house hunts, even during a seller’s market.

“The housing market is hot right now, especially in Middle and East Tennessee,” said Windham. “But if you’re thinking about buying a home in the coming months, you can still take several steps to prepare. That way, you’ll be ready when the perfect opportunity comes along.”

Why are U.S. Housing Prices Going Up?

In April 2021, the median sales price for existing homes increased by 19.1% year over year to $341,600. According to the National Association of Realtors, these are both record highs. 

So why the increase? The facts point to a number of factors, including low mortgage rates, a growing number of buyers and supply levels that simply aren’t keeping up with demand.

Why is Supply Outpacing Demand for Houses?

Since the end of the Great Recession, new home building hasn’t kept pace with the growth in population. What’s more, Millennials have reached an age and income level where they can now afford their first or second homes, which means fewer new homes are available for purchase. 

As builders work to bridge the gap between supply and demand, the demand for materials, particularly lumber, has also driven housing prices up. According to the National Association of Home Builders, lumber prices rose more than 300% from April 2020 to May 2021.

In high-demand areas, like Middle and East Tennessee, houses are in even higher demand. Tennessee has experienced the eighth-highest population growth during the pandemic, according to Bankrate.

What Does This Mean for Homebuyers?

Whether you’re ready to buy right away or you’re making plans for the future, Windham says the best thing you can do is plan ahead.

“The price of homes may fluctuate, but the value of being prepared does not,” said Windham. “Sellers and lenders are always glad to see a buyer that’s taken the time to plan ahead financially.”

Preparing to Buy a House During a Seller’s Market

A seller’s market is no reason to halt progress on your house hunt. In fact, you can take several steps to move your search forward before ever making an offer on a home. 

“Whether you’re looking to buy right away or in the future, now is the time to get your finances in order,” said Windham. “Simple steps like improving your credit, paying down debt, researching lenders and being pre-approved for a mortgage can make a huge difference when it comes to finding the right home.”

4 Ways to prepare for Buying a House

If you want to lay a strong financial foundation and lock in a great interest rate on your mortgage loan, here are a few ways to prepare for buying a house:

1. Boost Your Credit Score

A high credit score can make the home buying process easier in many ways, from increasing your chances of being approved for a mortgage loan to helping you qualify for a more competitive interest rate. 

The best news is, you can begin to improve your credit score in a few simple steps. 

“Start by making sure that you’re paying everything on time and that none of your credit cards are at their limits,” said Windham. “The higher your credit score, the better interest rate you may qualify for.”

Making on-time payments is the factor with the greatest impact on your credit score. If your bank offers digital banking options, you may even be able to set up autopay for bills so that you never have to worry about missing a payment.

Next, be sure to monitor your debt-to-income ratio. If your credit card is at or near its limit, you may want to reevaluate a few of your expenses to reduce the amount of credit you’re using.

If you manage multiple credit and debit cards, for example as a small business owner, you may even choose to try an app like CardValet, which can help you keep up with each card’s purchases and account balances, all in one place. SouthEast Bank proudly supports CardValet for all credit and debit card holders.

2. Open a High-Yield Savings Account

If you’re saving for a down payment on a house, or you already have a down payment saved, consider opening a high-yield savings account. It can help to keep your funds safe, all while earning an APY.*

If you’re in the market for a high-yield savings account, consider Bonus Rate Savings. You could earn up to 2.01% APY* and achieve your financial goals faster.¹

3. Organize Important Documents

When you’re applying for a mortgage loan, lenders will want to see proof that you’ll be able to pay back the loan over time. You can get a headstart on the mortgage application process by collecting the required documents.

“A mortgage professional will analyze all the information you give them to determine whether you’ll be approved for a loan, as well as what type of interest rate you’ll earn,” said Windham. “Showing up organized and with the right documents in-hand can make the process go much more smoothly.”

A few documents to put together before applying for a mortgage include:

• Proof of income
• Bank statements
• Other assets, like investment or retirement accounts
• Information about debts, like student loans
• Gift letters
• Identification, like a driver’s license or passport
• Renting history

4. Apply for Pre-Approval With a Mortgage Lender

When you’re ready to put in an offer on a house, consider applying for pre-approval with a mortgage lender. Once you’re pre-approved for a mortgage loan, the lender will give you a letter that confirms you meet the qualifications to borrow from them.

Sellers often give precedence to pre-approved buyers, as they’ve proven they’re ready to take the next step. Especially in a competitive market, it’s key to be as prepared as possible when making an offer on the perfect home.

“When you find the right home, being pre-approved for a mortgage loan can help make you a more competitive candidate,” said Windham. “At SouthEast Bank, our experienced team works to make customers’ housing goals a reality every day.”

SouthEast Bank’s expert mortgage lending team would be happy to support your next home construction project or purchase. You can learn more about our mortgage loan options here.

Bottom Line

Even while the housing market is hot, you can make great progress on your home search by preparing your finances. A few small actions can lead to big payoffs when it comes to buying during a seller’s market.

For more information about SouthEast Bank’s mortgage options, you can explore our website or contact any member of our mortgage lending team.

*APY = Annual Percentage Yield

¹To earn the bonus rate, the account holder must have a SouthEast Bank checking account with the Round Up feature, enroll the Bonus Rate Savings account in eStatements and post and settle 15 round up debit card transactions. This is a variable rate tiered account. If all qualifications are met during the statement cycle, 2.01% APY will be applied on the balances up to $10,000 and .20% APY on balances over $10,000 will be credited. If bonus qualifications are not met during the statement cycle, the account will earn 0.05% APY. Unlimited withdrawals at teller window or ATM and 6 pre-authorized withdrawals per month at no charge, including checks, ACH debits and online banking transfers; $3 fee for each thereafter. Fees may reduce earnings. Limit one Bonus Rate Savings account per primary owner tax ID.  Rates are accurate as of 8-1-2021. Rates are variable and subject to change after account opening.

Note: Links to other websites or references to services or applications are provided as a convenience only. A link does not imply SouthEast Bank’s sponsorship or approval of any other site, service or application. SouthEast Bank does not control the content of these sites, services or applications.

Information contained in this blog is for educational and informational purposes only. Nothing contained in this blog should be construed as legal or tax advice. An attorney or tax advisor should be consulted for advice on specific issues.