Thinking about your home ownership goals for 2021? If you aren't, you should be.
Between record-low mortgage rates, rising home sales and prices, and limited availability, there's never been a better time to re-assess your home ownership goals. After all, if the events of the past year have taught us anything, it's the importance of home.
Whether you're working on breaking into the housing market, a homeowner who's wondering if this is the year to sell, or you're planning on staying put in your current house for the foreseeable future, taking stock of your home ownership goals can help you make the most of your property investment.
There's plenty of opportunities for savvy homebuyers and home owners to get ahead in 2021, and in this guide, we've put together a list of tips you can use to make this year a great one for you, your family and your financial future.
HOME BUYERS
Know Your Credit Score
A good credit score can help you get lower rates on auto loans and credit cards, but a great credit score can give you access to historically-low mortgage rates.
Your credit score is a numeric indicator of your financial health. It includes factors such as:
- How much debt you currently have
- The number of credit inquires made by potential lenders
- Your debt repayment history
- Your personal information, including your date of birth and employment status
- Collections reports, including bankruptcy filings for up to 10 years
Knowing what's on your credit report is critical when you're planning on buying a home because lenders use your credit report to not only determine whether or not you qualify for a mortgage but to decide which mortgage rates to offer you.
Simply put, the better your credit score, the lower your mortgage rate will be.
Credit scores range from 300 to 850. Ideally, your score should be anywhere from 740 or better.
You can check your credit reports from the three major credit bureaus, Equifax, Experian and TransUnion for free at AnnualCreditReport.com. Your financial institution or credit card company may also offer free access to your credit report.
Once you receive your credit report, check to ensure all the information is accurate and up-to-date. It's not uncommon for credit scores to be low due to missing information or inaccuracies, such as a duplicate entry of the same debt. If you spot an error on your credit report, make sure to contact the lender to request that the error be corrected.
Work to Improve Your Credit Score
Aside from resolving any inaccuracies on your credit report, the single most important thing you can do to improve your credit rating is to pay down your debts. The fewer debts you have, the higher your credit score will be, and that will make all the difference when it comes to securing a mortgage.
Evaluate all of your debts, including credit cards, car loans and student loans. Look for ways to cut the interest your paying, particularly on high-interest store credit cards.
If possible, pay off your debts, starting with the highest interest rate debts first. If that's not feasible for you, look at transferring balances from high-interest debts onto a credit card with a lower interest rate, or try to secure an affordable debt consolidation loan. While this might mean giving up a few creature comforts in the interim, doubling down on debt repayment now will have a major positive impact on your credit score.
Build a Financial Safety Net
One of the biggest mistakes homebuyers make is coming up short on cash.
Purchasing a home is expensive, and not all expenses can be rolled into the mortgage. That means you need to have a cash reserve available to cover not only the down payment, but you'll also need money to cover moving costs, legal fees and the inevitable costs that come with purchasing a home.
Set up a cash savings plan now so that you won't be cash-poor when it's time to buy. This can mean enrolling in a paycheck savings program or manually moving cash into a dedicated account every week.
HOME SELLERS
Time Your Sale
If you're thinking that 2021 is the year to cash out the equity you've built up in your home, decide on the timing of your sale.
Historically, home prices tend to rise early in the new year, peaking in May, and plateauing in June. After that, sales trends show that prices tend to slowly decrease through the remainder of the summer and right through to the end of the year.
But, in 2020 the average price per square foot increased steadily throughout the year even in the typically slower months of November and December. We're continuing to see low mortgage rates and a tight housing inventory in the new year and Kansas City home prices are forecasted to increase by 6.5% in 2021.
Of course, sale price is rarely the only factor involved when it comes to listing your home for sale. You might need to hold off on listing due to work or family commitments, or you may need to wait for better weather in order to finish up some pre-listing home repairs.
In reality, there is no one month or season that is the ideal time to sell your home. Lean on a trusted real estate agent to talk you through when you'd most likely earn the highest profit, what needs to be done to make your home market-ready, and timing your sale to meet your specific needs.
Make Your Home Shine
With the available housing inventory at record lows in many regions nationwide, it can give home sellers a false sense of confidence when it comes to achieving the maximum return on their home sale.
While it's true that in some markets homebuyers will simply 'snatch up' any available home regardless of the condition, sellers shouldn't neglect the ever-critical pre-sale prep work.
Take the time to get your home in sale-ready condition by clearing up the clutter, cleaning all the surfaces, and even sprucing up tired walls with a fresh coat of pain. These low-cost projects can net you some impressive returns. Real estate agents report an increase of $10,000 to $15,000 to a home's sale price by simply doing a deep-clean on the exterior, while clean windows, bathrooms and kitchens can also make a big difference to your bottom line.
Maximize Your Living Spaces
The COVID-19 pandemic has put on spotlight on our living spaces. Our homes are no longer just places for eating, sleeping and relaxing, they're now where many of us work, exercise and play.
This lifestyle shift means that buyers are looking for homes with flexible spaces and extra rooms such as dedicated studies and offices, generous entertainment areas and chef-inspired kitchens. Also in-demand are patios, landscaped yards and multi-purpose rooms that can serve as home gyms or a second living room for the kids.
Now's a great time to transform that rarely-used guest room into a functional workspace, at-home school area or den. You might also want to reclaim your outdoor space by adding a cozy propane or wood-burning firepit, upgrading your grill area and sprucing up your seating areas. Not only will these simple home projects give you and your family more room to spread out, but these minor fixes can go a long way towards attracting buyer interest in your property.
Curious as to what your home would bring in today's market?
HOMEOWNERS
Review Your Household Finances
With the whirlwind of changes we've all experienced over the past year, there's a good chance that your family's financial situation may have changed. Whether you or your spouse were furloughed, experienced a wage reduction or increase, or you're simply working from home now, it's a good time to take stock of your household budget.
If you've managed to cut your spending by saving on work attire, commuting costs and business lunches, consider shifting those savings towards debt repayment. You may also want to use that 'found' money to put towards a big home improvement project, or to boost the down payment on your next property purchase.
Plan Your Home Maintenance Projects
Home maintenance can be stressful, but it doesn't have to be.
Knowing what preventative maintenance is needed, and how much that to budget for, can go a long way towards taking the stress out of routine home repairs. Not only can a home maintenance plan help you avoid those dreaded, and costly, emergency repairs, but a well-kept home attracts more buyers when it's time to sell.
Consider integrating energy-saving upgrades as part of your home maintenance plan. Little issues like leaky faucets, running toilets and poorly-sealed windows can lead to excessively high energy costs. For tips on how to conduct a do-it-yourself home energy audit, visit the U.S. Department of Energy online.
Not sure when to schedule seasonal and annual maintenance on your home? Check out our "House Care Calendar" for expert advice on keeping your home well-maintained throughout the year.
Invest in a Second Home
If you already own a home with a sizable amount of earned equity, now could be the ideal time to expand your real estate portfolio by investing in a second home.
In our report titled, "Move Up vs Second Home: Which One Is Right For You?" we break down the pros and cons of purchasing a second home, provide insider tips on choosing the best investment property, and give you information on how to maximize your investment.
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As local market experts, we have the knowledge, experience, and networks to help you achieve your homeownership goals, whatever they may be. Contact us today to schedule a free, no-obligation consultation.
