Survey: About 50% of Homebuyers Say Biggest Concern Is Affordability

A U.S. News & World Report March 2022 survey shows that about half of homebuyers say being able to afford a new home is their main concern.

But high home prices aren’t the only concern. About 27% of respondents say they worry most about availability. And nearly 23% say that they have concerns about both affordability and availability.

Types of Home Purchases Planned

Even though many Americans are worried about high home prices and limited inventory, a majority remain hopeful about their chances. Over 70% report that they’re optimistic they’ll buy a home or successfully refinance their current mortgage in the next year.

Respondents were asked what type of home purchases they plan to make within the next year. Here are the findings:

— Buy their first home: 48.3%.

— Sell their current home and buy a new one: 18.9%.

— Buy a second home (e.g., vacation home, investment): 10.4%.

— Refinance an existing mortgage: 22.4%.

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Types of Mortgages Sought

There are many different ways to approach buying, selling or refinancing a home in the current market. When asked what type of mortgage they are seeking, here’s how they respond:

— Conventional 30-year fixed-rate: 33.8%.

— Conventional 15-year fixed-rate: 30.3%.

— Conventional adjustable-rate: 18.1%.

— Government-backed mortgage (e.g., FHA): 12.7%.

— Other type, such as a jumbo loan: 5.3%.

A conventional 30-year mortgage is generally the most popular option because it results in a lower monthly payment. This makes it easier to afford the loan, but, on the other hand, it takes twice as long to pay it off as a 15-year. So that means you pay a lot more interest during the life of the loan.

The survey results, though, show that almost a third are seeking a 15-year mortgage. Unless you decrease your loan amount, you’ll likely have a higher monthly payment. But if you can swing it, it can help you save a ton on interest. It will be interesting to see if this trend continues as the rates rise during the year.

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Reasons for Refinancing Your Mortgage

Although the survey shows that most respondents are planning to buy their first home, almost one in four are planning to refinance their current mortgage.

Here are the reasons they give for refinancing:

— Get a lower monthly payment: 41.6%.

— Pay off the mortgage sooner: 23.8%.

— Tap into home equity: 15.6%.

— Switch type of mortgage: 8.6%.

— Eliminate mortgage insurance: 6.7%.

— Other reasons: 3.7%.

When you refinance your mortgage, you also have the option to get a different type of loan. For example, I refinanced my mortgage a few months ago. I switched to a 15-year mortgage but used the proceeds from selling my former home to vastly reduce my new loan amount. With this combination, I’ll save money on interest while still getting a much lower monthly payment.

4 Tips for Buying a Home in 2022

Asked if they have regrets about not buying a home or refinancing when rates were lower, nearly 70% say yes, they do regret waiting. As always, hindsight is 20/20, but dust yourself off and start looking forward.

With the Federal Reserve poised to raise rates and rising inflation still an issue, Freddie Mac predicts that mortgage rates will average 3.6% in 2022 and will increase to an average of 3.9% in 2023. Home prices will continue to rise, Freddie Mac forecasts, but at a much slower pace than in 2021.

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You may have missed the lowest rates, but if you still need to buy or sell your home in the next year, it’s best to take steps sooner rather than later.

Here are four tips to help you increase your purchasing power and get the house of your dreams:

Be realistic about your target range. Start by researching homes and prices in your desired location. Look at houses that recently sold and note trends within neighborhoods. If they sold for amounts over the list price, then you need to adjust your target price to accommodate that. Keep in mind that trends will vary by city, ZIP code and neighborhood. So don’t rely on the national news to tell you how much you need to offer over the list price in a specific neighborhood to win a bidding war.

Increase your down payment. Counteract higher mortgage rates with a bigger down payment. This way, you’ll still end up with a reasonable monthly payment. Resist the urge to grab a low rate and take on monthly payments that will squeeze the joy out of your life. Be patient and put off the purchase if it means affording the house you really want.

Increase your credit score. Your credit utilization ratio is the amount of credit you’ve used compared with the amount of credit you have available. Credit utilization is 30% of your FICO score, so it’s a big factor to keep in mind. To bump up your score in a hurry, your utilization ratio should not exceed 10%. If you have debt, pay it down — or preferably, eliminate it — before applying for a mortgage. This alone will improve your score because your utilization ratio will go down.

Check out resources for first-time homebuyers. You might be surprised by what’s available to help you with down payments or with finding a mortgage. The U.S. Department of Housing and Urban Development has a listing of resources by state. And don’t assume you can’t qualify if you’ve owned a home in the past. Some programs, such as the Georgia Dream Homeownership Program, consider you a first-time buyer if you haven’t owned a home within the past three years.

More from U.S. News

Your Guide to the Big 3 Credit Bureaus

How to Eliminate Credit Card Debt

How Is Your Credit Score Calculated?

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