This is Part 1 of 2 on how to navigate the bidding wars when purchasing a home.

The pandemic has shown individuals and families that they need more space to “work from home” (WFH).  More Americans see the value of owning their own home and they can decide where they want to live based on their WFH experience.

Interest rates, the value of owning your own home and space and the inventory shortage of active listings has created a frenzy of multiple offers.  You have to be prepared financially and learn how to navigate this crazy market.

Figure out your budget

EducateHomeBuyers.org urges future home buyers to do a budget.  Get a handle on your finances and carve out or reduce items that you can use for savings or to pay off debt.

Start with a prequalification so you know your numbers, like the payment, costs and what you might qualify for in a purchase price.

A new home can come with a higher mortgage payment, higher utilities, plus maintenance and repairs.  Understanding the numbers can tell you if you are ready to purchase a home.  It also gives you a chance to see your current expenses and make swift changes to make that new home more affordable.

Get pre-approved for a mortgage

There are three main reasons to start with a loan pre-approval.

1. Buying Power – It sets your maximum budget or buying power, so if you get in a bidding war you know the highest purchase price your income and debt ratio will allow.
2. Buyers Agent – your agent will want you to be approved prior to showing you homes. When you want to see a home, your agent must set an appointment and the seller typically leaves during your visit. This can be difficult if they have a family. It is unprofessional to not be approved before looking for a home.
3. Listing Agent/Seller – your agent uses the lender’s approval letter and attaches it to your offer. The offer is then sent over to the Listing Agent that presents it to the seller.

Remember, that you are in control of your budget and just because you are approved for a certain amount doesn’t mean you have to spend that much money.