Options for first-time homebuyers in a hot housing market

A hot housing market can be very daunting to a first-time homebuyer. Bidding wars and sky-high prices can be very intimidating. However, the first-time buyer has one positive that puts them ahead of experience homebuyers in a hot market: They don’t have to sell their home to buy a new one.

Without having to sell a home themselves, a first-time homebuyer can close within 30 to 60 days, especially if they have been pre-approved for a mortgage. Speed is a big factor for many sellers.

If you are faced with having to buy a home in a hot real estate market, take the time to determine how much you can afford. How much you can pay is not necessarily what the mortgage company will allow you to borrow.

How much you can afford depends on many factors that aren’t covered in a mortgage application. They don’t cover how many children you are planning to have, whether you want to retire early or if you have a health condition that may keep you from working in the future.

First-time homebuyers need to also determine how much cash they need in the market to buy a home. That includes not just closing costs, but how much you may need to put down in earnest money to win the bid on the home you want.

In incredibly hot real estate markets, the reality is that most desirable homes in the best neighborhoods will be out of the reach of the first-time home buyer. Be realistic and consider some other options.

Condos and townhouses appreciate in good neighborhoods. Don’t count them out in a hot market.

Homes in marginal neighborhoods can be a great investment, especially if you choose a neighborhood near an area that’s already being revitalized.

Homes in the suburbs. Most new homes are being built well outside of the city limits. It may not appreciate as fast as home near the city center, but if lower maintenance and modern amenities are important to you, the sticks may be the best option for you.