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All You Need to Know About Buying a Home in 2023
If you’re planning to buy a home this year, you won’t be dealing with typical circumstances. While the extreme market conditions characterizing the last two years are settling down, the market is still far from stable.
Here’s what you need to know about buying a home in 2023.
Flattening home prices
Year-over-year home prices shot up by 18.2% in 2021, followed by a generous 9.6% bump in 2022. The National Association of Realtors (NAR) predicts median existing home prices will inch up just 0.3%, and new homes will rise by 1.3% in 2023.
Stabilizing mortgage rates
Mortgage rates more than doubled in 2022, from approximately 3% to more than 6%, further driving up the price of buying and owning a home. In contrast, the 30-year fixed mortgage is expected to average between 5.2% and 6.8% in 2023, according to recent predictions by Fannie Mae, Freddie Mac, the Mortgage Bankers Association and the NAR.
More negotiating room for buyers
With the supply of available houses on the market creeping closer to the demand, buyers will have more negotiating power and be able to stand firm on their personal preferences.
Tips for buying a house in 2023
If you plan to buy a new house this year, here’s how to prepare for and ensure a smooth process.
- Get your finances in order. Try to take a good look at your finances at least six months before shopping. How much money do you have saved up for a down payment? How much can you afford to spend on a monthly mortgage payment?
- Boost your credit score. Work on paying down debt, always paying bills on time and lowering your credit utilization in the months leading up to your search.
- Understand your mortgage options. Depending on your personal circumstances, you may benefit from a mortgage backed by the Federal Housing Administration (FHA), which only requires a 3.5% down payment, or a VA mortgage, which requires nothing down. Similarly, a 30-year fixed-rate mortgage may be in your best interest, or you may prefer a 15-year adjustable-rate mortgage (ARM).
- Shop around for a mortgage lender. Look for a lender that offers the kind of mortgage you need. You’ll also want to compare the loan estimates you get from different lenders, looking at the rates, fees, estimated closing costs and anticipated monthly mortgage payment.
- Get pre-approval before starting your search. This way, you’ll know exactly how much house you can afford, and sellers will regard you as a serious buyer.
- Move quickly when you’ve found a possible yes. If you want to buy a home this year, it’s a good idea to make an immediate offer on any home you like.
Use this guide to learn what kind of market conditions you’ll be facing when buying a home in 2023 and how to prepare for the process.
Your Turn: Do you plan to buy a home in 2023? Share your best tips in the comments.