Here’s what to do before you buy a home in this hot housing market

Looking for a new home may seem like a daunting task these days.

Prices are up, inventory is low and mortgage rates are rising.

That’s why, in this environment, it pays to do your homework before you enter the market. Once you start looking, you’ll have to move at light speed to place an offer, explains Jessica Lautz, vice president of demographics and behavioral insights for the National Association of Realtors.

“As interest rates are climbing, there has been a rush to lock in lower relative rates, while at the same time the inventory of homes has hit all-time lows,” she said.

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The median price of a home in January jumped to $350,300, an increase of 15.4% from January 2021, according to the National Association of Realtors. Homes are spending an average of 19 days on the market.

Meanwhile, the mortgage rate for a 30-year fixed loan is 4.17%, according to Mortgage Daily News. Early last year, they were less than 3%.

With that in mind, here’s what you can do now to put yourself in the best position to find your new home.

Earnest money is the deposit you put down on the property you’d like to buy. It shows good faith, and the funds eventually go toward the down payment and closing costs. An appraisal contingency is a provision in your contract that allows you to back out if the appraisal price comes in lower than the sale price. That difference in the appraisal and sale prices is known as an appraisal gap.

Similarly, a home inspection contingency gives you an out if there are issues that arise during the home inspection. In both cases, you can also try to negotiate with the seller instead of pulling out of the sale.

Since competition is so fierce, many buyers have been waving contingencies in order to get a leg up.