Mar 16 2022

Buying a Home in a Competitive Market

If you’re in the market for a new home, you’ve surely noticed that today’s housing market is red hot. Competition is fierce and bidding wars are common, making how you approach your home-buying journey all the more important.

If you’re in the market for a new home, you’ve surely noticed that today’s housing market is red hot. Searing with no indications that it’ll cool off anytime soon. Competition is fierce and bidding wars are common, making how you approach your home-buying journey all the more important.

Determine What You Can Afford

A common rule of thumb, used by the Federal Housing Administration and some lenders, is that 31% or less of your income each month can go to a housing payment. That is, if you’re also making monthly payments toward debt, and that debt isn’t more than 43% of your income — your debt-to-income ratio, or DTI. If you’re fortunate enough to be debt free, you may be able to allocate 40% or more of your income each month to payments on your home. An online mortgage calculator is a good way to get an idea of what you can afford.

The Importance of Mortgage Pre-approval

Beyond gauging what you can afford on your own, the mortgage pre-approval process can often give homebuyers a much better idea of what they can spend on their new homes. When you seek to get pre-approved for a mortgage, a lender will do a credit check and go over your financial information, such as tax returns, your debts and assets, employment history, and other information that determine your creditworthiness. Unlike pre-qualification, which offers a general estimate of what you can afford, pre-approval takes a detailed look at your financial situation.

Then what? If you qualify for preapproval, your lender will set a maximum amount you can borrow and give you a pre-approval letter that’s usually valid for 60 or 90 days. This letter doesn’t guarantee you’ll get a loan for that amount, but if your financial situation doesn’t change by the time you apply for a mortgage, the pre-approval amount should be very close to the actual loan amount.

But the benefit of a pre-approval letter goes far beyond determining affordability — home sellers generally want buyers to have pre-approval letters in hand. A pre-approval letter shows a seller that the buyer is serious, and that there aren’t likely to be any major road bumps in getting a mortgage and thus getting the deal done in a timely manner. In today’s competitive market, having a pre-approval letter can mean the difference between getting your dream home or losing out to another buyer.

Look and be Ready to Leap

Historically low interest rates and low inventory have combined to overcharge the housing market, and so homes sell fast these days; the national average is 22 days to sell a house, but many homes find buyers within just days of hitting the market. The clock is ticking for homebuyers — most have days, not weeks, to make decisions when they find the home they want. An active approach is best, checking new listings often, putting daily effort into the search, and investigating each potential purchase immediately. And when you’re ready — go for it! This is the part where the importance of a pre-approval letter can’t be stressed enough. Getting bogged down in a mortgage approval process as your home goes to someone else is exactly what you don’t want.

Keeping Cool in a Red Hot Market

Remember to take some deep breaths, step back from the process, don’t go into panic mode, fearing that your perfect house will get snatched up by a buyer who moves faster than you do. This frenzied approach could lead you to make mistakes. As is often the case with new relationships, if you think a home is “love at first sight,” you probably haven’t gotten under the surface to see its flaws. But don’t be turned off by every flaw you encounter when shopping for a home. You’ll probably have to find some compromise with the home you buy, realizing that it’s not absolutely perfect, but that the pros far outweigh the cons.

Finding the Right Home for You

This can be a tough one; there are hundreds of factors — perhaps even thousands — that one could consider when looking at a potential new home. All of these factors aren’t equally important, and you’ll need to narrow things down to the most important features of a home, those that will affect your everyday life as well as your investment. Here are some major things people often consider when buying a house:

  • Price. After you’ve done your due diligence with a mortgage calculator, and perhaps pre-approval, you should take a deep dive into your spending habits. Plus what your move will cost, the closing costs of the mortgage, and the cost of any improvements or repairs the home may need. Take a realistic look at what you can pay.
  • Location. Where you live needs to fit your lifestyle; do you want to live a suburban, rural, or more cosmopolitan life? If you have kids, you’ll want to check out the schools in the area, and if your potential new home is in a kid-friendly area.
  • Bedrooms. If you have children, or plan to, this is a big one. And don’t just focus on the number of bedrooms; size is a factor, as siblings may be able to share large bedrooms. Does the home have space that could be converted into bedrooms, such as an office or a large living room that could be partitioned?
  • Bathrooms. Historically, two full bathrooms for a single-family home have been most common. But the rising trend in newer construction of American homes has been three or more bathrooms. From bathtubs versus stand-alone showers to dual sinks versus single ones, consider which bathroom features you will actually use.
  • The kitchen. Kitchens are often the home’s gathering space, so consider if your potential new kitchen has room for your family and guests. Check out the appliances. If the refrigerator, oven, and dishwasher aren’t in good shape, you may have to consider replacement costs.

You’ll also want to look at what kind of outdoor space a home has — yards and gardens are important to some folks — as well as parking, energy efficiency, and more.

As you enter this home buying competition, you’ll have no better ally by your side than City Lending. Contact us today to talk about how we can help you navigate the red hot real estate market.

These days, more and more people are looking to buy their dream homes, especially as remote work and work-from-home setups have become an enduring trend. A 15 point increase in requests for home tours and other home-buying services, along with a 11% rise in Google searches for homes, indicate an uptick in demand to buy houses in the country. However, there is a definite worry about affordability when it comes to housing, especially as hefty price tags on available residences have kept the market just as competitive as before, if not more.

According to the latest reports from analysts, it’s not all bad for existing homebuyers and aspiring house hunters. As previous data shows, timing matters in the housing market, and working on different approaches to home buying – like through a reliable lender – can help advance you towards more affordable housing goals. Below, we discuss whether house hunters should buy now or wait, and why.


What is your financial situation?

Counter to the rise in home demand, there is a considerable lack of supply. Along with rising prices and interest rates, the housing market may seem like a highly competitive space with wealthy homeowners fighting for what little property is left. It can be overwhelming, but knowing where you stand financially can help you better strategize your home buying journey. Following the four key components of affordability, ask yourself:

  • How much do you have saved for a down payment?

  • How much does your household earn?

  • What debts do you carry?

  • What is your credit score?


Familiarizing yourself with these components will help inform your decision on whether or not to wait. For example, taking the time to improve your credit scores before committing can save you from higher interest rates in terms of your monthly mortgage payments. Alternatively, many young homebuyers are compromising by living with family for a significant amount time to save up for a down payment. Getting this out of the way when you’re able to can help you get better loans to buy sooner than later in case interest rates end up increasing.

What kind of home is best for you?

Buying a home is a huge purchase and a big commitment. With shifts to digital and remote ways of working taking place in recent years, this has provided homebuyers with opportunities to be more flexible when buying homes. Homes in areas away from busy cities and urban hubs, for example, are considerably cheaper. This makes them a perfect option for buyers who work from home, or aren’t required to be present in the office on a consistent basis.

The lifestyle you expect to live is as much a factor to consider as money. Condos and townhouses offer lower maintenance costs in the long run, and are perfect for smaller households when compared to single-family homes. If the household grows, homebuyers looking for a side income can even invest in renting out purchased properties to passively earn back what they spent and look into bigger properties for family use.

What does the future look like?

In a previous post, we talked about the rising mortgage and interest rates. While the market may seem bleak or intimidating in its current condition, housing experts also believe factors such as supply have a high chance of returning to pre-pandemic levels by the end of 2024. If you are financially able, buying now while others may be intimidated by the prices can give you an edge. Conversely, taking some time to get your finances in order can benefit you when it comes to securing better loans and lower interest rates.

Working with experts can help you make better decisions for the loans you need, making sure you don’t get trapped with high interest rates or hidden charges. The future of fintech suggests that big data is the future of loans, as more online lenders are now using algorithms, which predict potential defaults better than FICO scores do. Data is also leveraged precisely to identify customers who fit various products well — which can give you peace of mind, as an aspiring borrower. Here at City Lending for example, we find the right programs to fit your needs and profile, making sure you get some of the lowest down payments and interest rates along with a premium service.

And if you’re still unsure, it’s worth considering that waiting it out in the market’s current wild conditions could result in even higher interest rates in the future. At the end of the day, buying a house is ultimately a huge investment, which comes with benefits such as privacy and a financial investment that for the most part will weather most economic storms.

Find out if this is the right time for you to get a house by contacting one of our loan officers today.


Content intended only for the use of

Written by Alicia Christopher

Share with your contacts

Become a member

Get the latest news right in your email. We never spam!

      Full Name



      Book a call

      Let us help you