Tips For Buying a Home in the Current Housing Market
- Thomas Van Spankeren
- Apr 6
- 4 min read
Purchasing a home in this environment is challenging given interest rates and limited inventory.
Utilizing seller credits and mortgage pre-approvals can increase acceptance likelihood.
Money saved for a down payment should be managed very conservatively.
With interest rates more than doubling since the all-time lows in 2020 and 2021, buying a home has become more difficult. Interest rates are not the only thing that have increased in that time frame. Across the nation, property taxes, homeowners’ insurance premiums, and home prices rose rapidly over the past four years. With affordability becoming tougher, here are some tips that can help you get a lower monthly payment and get your offer accepted.
Seller Credits
Seller credits are funds from the seller that the buyer can use in a variety of ways. The three main ways seller credits get applied are toward repairs, buying down the interest rate, and helping with closing costs.
Interest Rate Buydowns
Seller credits can be used to buy down the interest rate to get a lower monthly payment. There are two types of buydowns:
Permanent buydowns involve using the seller credits to permanently buy down your interest rate.
Temporary buydowns also involves seller credits to buydown your rate but only up to 3 years from your closing date.
The last thing to note about temporary buydowns is that if you refinance the loan before the temporary period expires, the remaining subsidies are applied towards your unpaid principal balance which helps you get a lower loan amount.
Closing Costs
When purchasing a home, there are standard closing costs you need to be aware of on top of your down payment. If you are using a mortgage to purchase a home, there are standard closing costs like lender fees, third party fees and escrow fees.
Seller credits can be used to help cover these costs which keeps cash in your pocket. In certain instances, a negotiated seller credit can be used to cover part or all of the closing costs leaving the only cash needed at close being the down payment.
Tips for Getting Your Offer Accepted
With limited inventory across the nation, there are still bidding wars and multiple offer situations. Most people think that it is only the highest offer that gets accepted. There are terms that you can negotiate in your offer to make it stand out against the competition.
Getting pre-approved by a mortgage lender shows the listing agent and seller that you are a serious buyer. You can even take this a step further and ask to get your loan application reviewed by an actual underwriter. This tells the listing agent that your financing is good to go pending the appraisal and clean title for the property.
Offering to put down more earnest money shows the seller that you are serious about that specific property. An earnest money deposit is money you put down shortly after your offer has been accepted. This also works as a credit towards your final cash to close number.
The last tip is how fast you can close on the home. The average escrow period after going under contract is 30-45 days. Depending on how straightforward your loan is, it is possible to close in as little as 14-21 calendar days. A quick escrow period can help the seller move on from the property that much faster.
Saving for a Down Payment
Saving for a down payment is often the biggest hurdle in affording a home. A potential homebuyer looking to purchase a home in the busy spring selling season must be prepared to come up with liquidity in short notice. Funds set aside for a down payment should be managed very conservatively and preferably in risk-free, extremely liquid, and interest-bearing investments such as United States Treasury Bills.
Often, we see potentially homebuyers saving for a near term down payment in the stock market. While the stock market is an excellent savings mechanism if the home purchase is years away, it can come with risk.
Consider last spring’s selling season and a potential homebuyer placing $100,000 of down payment funds in an S&P 500 ETF at the beginning of the year and making a home purchase on April 7th, 2025.
The S&P 500 declined from approximately 6,000 to 5,000 from the beginning of the year thru April 7th. This 17% would result in the down payment savings declining to ~$83,000 which may result in the homebuyer not able to afford the down payment.
Authors
This article was written in collaboration by Thomas Van Spankeren and Mike Angus.
Thomas Van Spankeren
RISE Investments
M: 708-860-4112
A: 134 N LaSalle Suite 1760, Chicago, IL 60602
Mike Angus
LeaderOne Financial Corporation NMLS #1398541
M: 708-912-9978
A: 1111W 22nd Street, Suite 620, Oak Brook, IL 60523
Disclosures
RISE Investment Management, LLC ("RISE" or "RISE Investments") is an investment adviser registered under the Investment Advisers Act of 1940. Registration of an investment adviser does not imply any level of skill or training. This publication is solely for informational purposes and past performance is not indicative of future results. Any description of products, services, and performance results of RISE contained in this publication are not an offering or a solicitation of any kind. No advice may be rendered by RISE Investments unless a client service agreement is in place. Advisory services are only offered to clients or prospective clients where RISE Investments and its representatives are properly licensed or exempt from licensure. All of the information in this publication is believed to be accurate and correct as the date set forth. RISE does not have or accept responsibility or an obligation to update such information. Please note, this article is for education purposes and should not be treated as tax or legal advice. This article is not a substitute for legal or tax advice from your professional legal or tax advisor.
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