How To Buy Your First Home in Today's Market [2024]

Are you a first-time homebuyer and want to know how to buy your first home in today's market? Keep reading to learn more about the steps to tackle this process. 

Homeownership has always been the American Dream, and many people do not understand the full process of achieving it. Whether you want a single-family home, condo, apartment, or townhome, it is important to know what you want, how to get it, and how to jump into the market as soon as you are ready. 

The housing market is a constantly evolving landscape. It is essential to have a clear understanding of the market and the entire home-buying process. This may seem overwhelming, but with the proper knowledge and assistance from a trustworthy real estate agent, the process can go smoothly and with ease.

Remember that mortgage rates are high, home prices have risen, and living costs are higher than normal, making moving harder and more expensive. Moving is a highly personal decision, and everyone looks for different things when they are moving somewhere new. And location is a big one, so be aware that some of these places may not fit your needs.

However, despite the high rates and expensive cost of moving, many homeowners are taking on the new year to relocate somewhere new. Whether it be a new neighborhood, town, city, or state, they are packing up their things and moving on to a new life.

Here is how to buy your first home in today's market. 

Understand the Current Housing Market

The housing market has drastically changed over the years. If you are searching to buy a home, the current housing market is a major factor that you should look at to make sure you make the best offer. Take time to learn more about your local market and rates today. 

The American Institute for Economic Research sees mortgage rates falling this year, which means home prices will start to go up. If inflation continues to fall, interest rates will be cut, and a high demand will increase. Some markets vary, so understanding the local area you are looking for is essential because every location is different. 

The overall outlook for the housing market in 2023 is improving, and the sales slumped due to mortgage rates in 2023. It will improve drastically and start to become a great time to invest in real estate again. Keeping an eye out for rates and prices and the overall market is important if you are intersted in making the investment. 

If you are searching for a home in the Triangle, you are in luck because there is predicted to be a decline in home prices from the rates, and the market is predicted to remain stable with a positive trend. With the current and future market trends, now is predicted to be an excellent time to purchase a home. There are buyer-friendly conditions, low sale prices, and average times on the market that make the buying process attractive to buyers. 

Set a Homebuying Budget

If you are ready to buy, your first step in home-buying is figuring out your budget. You should only buy a house when the monthly payment is no more than 25% of your monthly take-home pay. Sticking to that number will leave you plenty of room to cover any home maintenance repairs or other costs. 

The purchase price and down payment are not the whole picture. Setting a realistic budget, including the costs, will not only help you find a home you can afford but also help the agent working with you find a home. 

Once you know how much you can afford to spend on your new home, you need to stick to that amount and search for homes within that area. When buying a cost, some many other costs and fees go into it, so setting a budget helps you narrow down your options, helps you budget, and saves you the stress of not being able to afford it. 

However, keep in mind that everyone is different and how you budget may differ from other people, so make sure you find the best way you can budget to save for your new home. There are many ways to do so as well as online resources. 

Save for Down Payment

To avoid having to pay private mortgage insurance, you will need to put down at least 20% of the home purchase price for a down payment. Some lenders offer mortgages without PMI with lower down payments, but then you will need to expect higher interest rates. 

Many types of loans require a much lower minimum down payment, and many government programs help cover down payment costs for some qualified buyers. Making sure you do your research is essential to understanding the requirements for down payments, how to save, and what loans you can qualify for. 

How Much Should You Save?

• Down Payment: Aim for putting down 20% so you avoid PMI, a fee added to the monthly mortgage. First-time home buyers tend to make a 5-10% down payment with other fees and rates added, though. 
• Closing costs: Save around 3% of your home's purchase price for closing costs, which cover property taxes, insurance items, and other fees charged. The percentage does vary. 
• Moving and other expenses: Moving expenses do vary depending on how much you are moving, the company, and how far. To help with budgeting, find different quotes ahead of time to get a better understanding of how much to save. 

Buying a home takes planning and preparation. The most time-consuming part is usually saving the money for a down payment, costs, and other expenses. There are many ways to help you plan ahead, but it is important to understand what you need to save because when you buy a house, there are many other costs that go into it. 

Understanding of Hidden Cost

There are hidden costs when buying a home, including closing costs, insurance, and utility costs. While the mortgage payment is a high cost for buying a home, there are other prices that go into it as well; some are one-time, while some recur after. Here are some hidden costs to be aware of when you are buying a home. 

• Earnest Money: A deposit telling the seller you are serious about buying the home. This money is placed in an escrow account, and when you close on the home, the deposit typically goes toward purchasing the property. This varies but typically ranges between 1-5% of the purchase price. 
• Closing Cost: On average, about 2-5% of the purchase price in closing costs. These may include loan application fees, appraisal fees, inspection fees, transfer taxes, escrow fees, attorney fees, title insurance, and more. 
• Property Taxes: These differ from city to county and state. Depending on what the area assesses your home you will have to pay the taxes there. 
• Homeowners Insurance: Many mortgage companies require this, but there are many different types of insurance available to offer coverage. It is usually contingent on the area where you live. 

For more information about other hidden costs when buying a home, check out our guide here. Understanding these hidden costs can have a huge impact on your budget and purchasing power for a new home. Be aware that these numbers and percentages do differ. 

Get Pre-Approved Loan

Pre-Approval

The best way to buy a home is with cost, while others do get a mortgage, which you will need to get pre-approved. A pre-approval is when a lender estimates how much they are willing to lend you based on your income and your credit score. Getting pre-approved can help potential buyers know what they can afford and make the home-buying process more accessible. 

Keep in mind that qualifying for a pre-approved is not as easy as it seems. Lenders do require the buyers to provide a lot of documentation, such as pay stubs and tax returns. This may be harder for people who are self-employed or have different and unique financial situations. 

Pre-approvals are also not always 100% accurate. If the lender does not have all the documentation and everything they need, they may approve the buyer a loan that is bigger than they should have, and then the buyer will be left with a mortgage they cannot afford, so just be aware. 

Mortgages

It is important. to find the best mortgage option. It may seem impossible to obtain a mortgage, especially with the current interest rates and lender requirements; it is possible, but it may be challenging. Buyers may need to take certain steps to increase their chances of getting approved.

Here is an overview of some things you may do to make getting approved for a mortgage easier. There are many resources to use to help you. 

• Getting pre-approved
• Having a larger down payment
• Fixing your credit score/financial history
• Look for financial programs
• Consult with a professional

You also need to be aware of mortgage insurance or private mortgage insurance and whether you need it. These two have many differences, and they can be hidden costs. 

Methodology

We used information and data from different sources to determine how to buy your first home in today's market and what goes into home buying. There were various data to use, and we put them all together to find out the best ways to help you buy your first home. 

• American National Bank and Trust
• American Institute for Economic Research
• Consumer Finance
• Investopedia

Those are some sources that we used to gather our information about first home buying and today's housing market. 

FAQS

Is 2024 a good year to move?

Home buyers are hoping that 2024 will be the year when home prices regain some normal lines. Thankfully, there's a promising sign that entering into the new year, mortgage rates will steadily decline over the next couple of months. 

Why should you wait till 2024 to buy a house?

Buying a home in 2024, especially in the early months, means you beat the rush. However, waiting to buy a home in the latter part of the year could mean you have more options as well as the potential for increased mortgage affordability, so it is up to you and your preference. 

Is it better to buy a house when interest rates are high?

Even with high interest rates, it is still a good time to buy. The higher the rates, the fewer buyers there will be in the market, meaning there will be less competition with offers. Depending on your preferences as well as your budget, you may want to wait or go ahead and buy your home. 

How To Buy Your First Home in Today's Market [2024] - The Bottom Line

2024 has been believed to be a better year to buy a home for some. Home prices will still be higher than usual, with some increase in between, but in most areas, the prices are supposed to level back out. Economists are optimistic that the Fed will lower rates, which will then influence mortgage rates and home prices. 

The affordability challenges will still continue to be in effect in 2024 like they were in the past year. The demand and low inventory of homes will still have a huge impact on the prices of houses, but the lower rates will also help prices level out. 

Many homeowners bought their homes at low-interest rates and are unwilling to sell due to the high home prices, so the low inventory will most likely still be in effect in 2024. The housing stock has been at a historic low, making ultra-high prices, but there are hopeful signs that it will trend back up with the declining mortgage rates and better home-buying conditions. 

Before you buy your next home or make the big step to move, feel free to contact one of our helpful real estate specialists, as they are eager to help you find the perfect home.