How inflation impacts first-time Boston condo buyers
What Is Inflation?
Before we review how inflation impacts first-time Boston condo for sale buyers buying their first home, we’ll go over what inflation is. This is a process that occurs when prices increase over time. As a consumer, this means that the money you currently possess is worth a little less than when you originally possessed this money.
For this reason, as a consumer, seeing inflation isn’t something you want. However, if you zoom out and look at this in a more macro way, some inflation is a good thing.
This is because, in theory, a healthy economy should always have some inflation. If often, prices rise over time, this encourages people to buy services, goods, and houses, even—instead of waiting to do so later.
As a result, there’s more work available for producers. This means they can continue to hire people who buy services and goods of their own.
However, when inflation jumps too high, the increase can be too much.
For example, imagine what a shock it would be (both to you and your wallet) if you used to pay $1.50 for a soda can and it suddenly cost $5.
This is why it’s important for inflation to occur but not too quickly.
Inflation impacts Boston condo for sale market in two different ways. The first of these is an increase in home price. This is because of inflation being passed onto homes as the price of the materials used for constructing the homes goes up.
As for homeowners who are selling their already-existing homes, economists would expect them to behave rationally. This means that, according to economists, they would put their homes on the market at higher prices.
The other impact that inflation has when it comes to Boston condos is on home appreciation. In the process of home appreciation, a home experiences price increases that are greater than those that would occur only due to inflation.
As a result, the home will have an actual increase in value. Many variables have an impact on home appreciation.
These variables include the Boston condo condition, square footage, the number of bathrooms and bedrooms, and location.
As a first-time home buyer, you’re likely wondering what impact inflation could have on buying a home. In the short-term, inflation has the impact that the prices of homes will continue to increase for a while. However, what do things look like if you’re thinking more long-term? Make sure you have submitted all loan applications, understand the average closing costs and all fees charged from the title company.
When looking at things this way, there could be a change when the US Federal Reserve makes short-term interest rates higher. After this, long-term interest rates would follow suit.
As a result, Boston condo prices could start to level off. They could even dip. Let’s face it, paying interest is part of the home buying process.
Considering the impact inflation is having on the housing market and home buying, you likely want to know what you should be doing within this market. First of all, you should pay off any of your existing debts so that you have a better DTI, or debt-to-income ratio.
This is one of the important factors that a lender will look at when deciding whether or not to provide you with a loan.
What is your DTI? This is the ratio between your monthly debt payments (both revolving and existing installment types) and your monthly gross income.
What you want is for your DTI to be as low as possible. If it is, then you’ll be more likely to be able to pay for a higher monthly payment. As a result, you would be able to pay for a more expensive home.
In a market where inflation is impacting the cost of homes, this can make an even bigger difference in your ability to buy a home than when costs aren’t as high as in that market.
There are several strategies you can use to ensure that your DTI ratio is lower. First, don’t open any new credit card accounts or make new purchases.
If your DTI is higher than 43%, this could get in the way of you getting a mortgage. So if that’s the case for you, start to pay off your debt and keep it in check.
Something else home buyers should do when the Boston condo for sale market is experiencing inflation is to improve their credit scores. This is for two reasons, one of them being that, to get a good mortgage loan, you need to have a good credit score.
The second reason is that the higher your credit score is, the better the rate you’ll get. This can make quite a big difference in a housing market where inflation is already driving up the cost of homes.
In addition to paying off your credit card, you should remove negative credit items such as charge-offs and collections if you can. This will also beneficially impact your credit score.
If you aren’t sure how to deal with your credit score or what items you need to remove, it helps to get started by doing a credit score check. From there, you can figure out which changes you have to make to improve your credit.
Being a first-time home buyer in a market where there’s inflation also requires you to be realistic. Your budget range won’t be able to fit everything you want in your home, so you’ll have to sit down and take a look at your current budget closely. Talk to your agent about things such as escrow accounts, underwriting fees, closing disclosure and mortgage insurance premiums
Is there anything you’re paying for that you don’t really need? It’s best to stop paying for it so you can make your budget for buying your first home larger.
Then, when it comes to the home you’re thinking of buying, be realistic with budgeting here, too. Put together three lists.
One of these should be a list of what you need your home to have. The other should include things you want it to have but could do without. The last one should include what things you could live without.
This way, you’ll be able to be a little more under control in the case of a bidding war. You won’t end up bidding more than you can afford.
Fortunately, when it comes to conventional loans, you usually only have to put down 3% for one-unit primary properties. However, if prices are high where you live, this can still be a large amount to pay. Add inflation to the equation, and this can be an even bigger amount.
For this reason, it’s smart to save the largest amount possible as a first-time home buyer. This way, you won’t feel the burden of that amount when you pay the down payment of the home.
Additionally, if you manage to save quite a large amount, you can pay a larger down payment. This will have a positive impact on your rate.
Don’t forget to save for the closing cost of the home you hope to buy, too. This can end up adding 3% to 6% of the home’s purchase price.
Now that you’ve learned what inflation means for first-time home buyers, you might want additional advice for home buyers who are buying a Boston condo for the first time. For example, maybe you want help understanding how to apply for a mortgage loan.
Whatever you need, we at Realty Biz News can help. We’re experts when it comes to real estate, as well as the impact of inflation on the market and what first-time home buyers are experiencing.