All You Need to Know About Financing a Home in 2024

If you want to buy a home, financing is almost always a must, especially in 2024’s competitive and high-cost market. With starter homes going for $200K+, it’s nearly impossible to purchase a home in cash. Unfortunately, getting financed and the process to do so is incredibly complex. 

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So, if you’re a new homeowner or an agent working with buyers, this is the guide for you. Here, we’ll dive deep into everything you need to know about financing a home in 2024.  

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Even the most seasoned agents must keep up with market changes, trends, and education to keep up with the ever-evolving market. No matter your experience or level of expertise, keep reading to keep up with home financing in today’s market.

Home Financing: The Current Market 

If you’re already in the real estate market, you know how tumultuous the market has been recently. Although interest rates have stabilized somewhat after the volatility of previous years, they remain higher than the historic lows seen in the early 2020s. This has led to a shift in buyer expectations and purchasing power. 

New lending guidelines have been implemented on the regulatory front to enhance market stability. These include stricter debt-to-income ratio requirements and more rigorous income verification processes for self-employed borrowers. These changes aim to prevent another housing crisis but may make qualifying for a mortgage challenging for some buyers. 

As for challenges you should know that affect US markets, many areas are seeing issues related to housing inventory shortages. Many experts are citing this factor for driving up prices. A fact that’s making it difficult for average buyers to find homes that meet their needs and align 

Mortgage Types to Discuss with Clients 

As a real estate agent in 2024, it's crucial to understand the diverse mortgage options available to your clients. Here are the most common types and the most important factors to know about each. 

1. Conventional: Conventional loans offer flexibility and potentially lower costs for borrowers with solid credit, but they typically require higher down payments.
2. Government-backed: Loans like FHA, VA, and USDA provide more accessible options for first-time buyers, veterans, and rural homeowners, respectively, often with lower credit score requirements and down payments.
3. Jumbo: “Jumbo” loans are just that—for jumbo houses. They are essential for high-value properties exceeding conforming loan limits, ideal for luxury market clients. 
4. ARMs vs. Fixed Rates: When comparing ARMs (adjustable-rate mortgages) to fixed-rate mortgages, consider your client's long-term plans and risk tolerance; ARMs may offer lower initial rates but carry future uncertainty. 

Finally, stay informed about emerging mortgage products in 2024, such as green mortgages for energy-efficient homes and hybrid loans that combine traditional mortgage features with home equity lines of credit. 

The Pre-Approval Process: Guiding Clients 

In the competitive 2024 market, guiding your clients through the home financing process is more crucial than ever. Start by emphasizing the importance of pre-approval, which gives buyers a significant edge by demonstrating their serious intent and financial readiness to sellers. That process starts with gathering essential documents early, such as: 

• Recent paystubs
• W-2 forms
• Tax returns for the past two years
• Bank statements
• Information on any other assets or debts.

It's vital to clearly explain the difference between pre-qualification and pre-approval to your clients. Pre-qualification is a quick, informal estimate of how much a buyer can borrow based on self-reported information. In contrast, pre-approval involves a lender's thorough review of the buyer's financial documents, resulting in a conditional commitment to lend a specific amount. 

In today's market, pre-approval carries much more weight and can be the deciding factor in a successful offer, especially in multiple-bid situations. Since the market is competitive, and this is bound to happen, it’s best to advise your clients to become pre-approved rather than pre-qualified. 

Home Financing: How to Work With Lenders 

As a real estate agent, you should strive to be your client’s one-stop shop for all things buying a home, including finding home financing. Financing a home can be much easier and smoother for your clients when you have a relationship with local lenders. 

To do so, engage with a diverse network of lenders to understand their unique specialties, whether it's first-time homebuyer programs, jumbo loans, or specific property types. This knowledge allows you to match clients with the most suitable lenders for their needs. 

By leveraging your lender relationships and understanding the nuances of different loan products, you can provide exceptional value to your clients, guiding them towards the best financing options for their unique situations.

First-Time Homebuyer Programs & Incentives to Share 

Last but not least, we can’t talk about financing a home in 2024 without touching on today’s first-time homebuyer programs and incentives. Federal programs like FHA loans continue to offer low down payment options, while the HomeReady and Home Possible programs from Fannie Mae and Freddie Mac provide flexible financing for low- to moderate-income buyers. 

Be aware of state-specific programs, such as down payment assistance grants, tax credits, or reduced interest rate loans, which vary by location but can offer substantial savings. Many cities and counties also have local programs targeting specific neighborhoods or demographics.

To help clients access these programs, here are a few tips: 

1. Start by pre-screening them for potential eligibility based on income, credit score, and property location. 
2. Guide them through the application process, which often involves homebuyer education courses. 
3. Partner with lenders who specialize in these programs to streamline the process. 

The Final Word: Financing a Home in 2024 

With this guide, you’re all set to inform your clients of their home financing needs in 2024. From the current market state to the types of loans available, it’s wise to always stay up with the latest news and trends regarding financing a home, selling one, buying one, and beyond. 

Of course, that includes keeping up with your required continuing education or simply improving your knowledge to improve your success. At NCI, we’re Michigan’s top real estate certification and training school. We offer continuing education through live webinar courses, in-person courses, and online self-paced courses, as well as a wide variety of 24/7 online resources. 

Enrich your real estate career with the leading real estate educator. Get in touch to get started now! 

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