Owning a home has long been part of the American dream. But for many, that dream may feel far from becoming a reality. In many parts of the country, low housing supply and high demand are driving prices higher and causing buyers to snap up eligible houses quickly. Buyers are acting fast, driving the median time a house is on the market from a high of 11 weeks in 2012, down to just 3 weeks – with many homes selling the same day the “For Sale” sign goes up. 
If you’re a potential buyer, this means you need to be prepared to act quickly if you want to land your dream home within your price range.
Staci Titsworth, a mortgage territory sales manager for PNC, offers five ways you can help your chances of finding your new home, no matter how hot the market.
1. Find a real estate agent you trust. Your real estate agent will be a key partner and resource as you search for a home, so it’s important to find someone you trust. Take note of the names you see on “For Sale” signs in your desired neighborhood, ask for recommendations from friends and family or network with potential agents at open houses to find someone you believe will be a strong partner.
2. Get pre-approved (not pre-qualified). Pre-approval means the mortgage lender has reviewed your full financial picture - including income, debt, credit, assets and affordability (your target home price compared to your spendable income). A pre-approval is free and shows the seller that you can obtain a loan up to a certain amount within a specified time period, usually 90 days.
“A pre-approval can help make your offer look more attractive to sellers because it paves the way for a faster closing,” Titsworth says.
Be prepared to share the following documents with your mortgage lender:
3. Know your criteria. Talk to your realtor to find out if your “must haves” in a home are realistic within your price range. In a hot housing market, time is of the essence, so don’t waste time touring homes that are outside your budget or clearly won’t fit your needs. With your criteria in mind, your realtor can keep an eye on homes coming on the market soon and potentially snag an early showing for you. Realtors also are embracing technology and they post photos and virtual tours of homes on the internet. Take advantage of this to quickly research a home before taking the time to visit.
If you can’t make it to a home in person, but feel strongly that it’s the one for you, ask your agent to do a virtual tour. “A lot of agents will video chat with buyers if they are out of town or can’t get to a house in person for whatever reason,” Titsworth says. “This allows you to make an offer quickly and you can make your contract subject to an in-person viewing and a home inspection. This lets you go to contract quickly, but you can be protected if you discover a deal breaker during the inspection.”
4. Don’t wait for 20 percent. You don’t necessarily need to drain your life savings to become a homeowner. While it’s great to aim for a 20 percent down payment, you may be able to put down much less – potentially as low as 3 percent – depending on your lender and loan type. Just remember that the less you put down on the loan, the higher your monthly payments will be.
“With relatively low interest rates right now, it’s very affordable to borrow. More and more people are opting for a smaller down payment and borrowing more. This can be a smart move, as long as you can still manage the monthly mortgage payment, because it allows you to hang onto more of your cash,” Titsworth says.
Your down payment amount probably doesn’t matter to the seller (they’re more concerned with the sale price), but it definitely matters to you. “Houses are just like partners – there’s often a ’honeymoon phase‘ in which you easily overlook flaws. But as you live in the house, you start to notice things you want to change,” Titsworth notes. “When this happens, it’s good to have a little extra money available so you don’t have to take on more debt.”
5. Make a strong offer. Be sure your offer is fair. Making an offer far below the asking price may offend a seller, making them reluctant to negotiate with you. Your offer is more than just a dollar amount, though. Having a pre-approval may help your chances if another potential buyer makes an offer, but doesn’t have proof that they can secure financing.
The same is true of a home sale contingency – a caveat that states you will buy the house once your own home sells within a certain time period. Most sellers want a fast close, and a home sale contingency can make your offer less attractive. If possible, look into selling your house before buying – just make sure you have a place to stay if the timing isn’t right.
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Titsworth strongly recommends that buyers get a home warranty, which can help cover the cost of certain repairs and help protect against financial surprises following move-in. Many sellers include a home warranty, or you can ask your agent to negotiate it into your contract.
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1. “Drop in Time on Market to Sell a Home,” http://economistsoutlook.blogs.realtor.org/2017/12/21/drop-in-time-on-market-to-sell-a-home/
Pre-approvals are subject to property underwriting and appraisal. Borrower must satisfy pre-approval conditions outlined in commitment letter. Loan amount subject to property appraisal.
These articles are for general information purposes only and are not intended to provide legal, tax, accounting or financial advice. PNC urges its customers to do independent research and to consult with financial and legal professionals before making any financial decisions.
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