If you’ve been out house hunting in recent months, you probably already have a sense of how competitive the real estate market has become. The new tenor of the market can be traced back to the precipitous dip in mortgage interest rates that came on the heels of the global pandemic. Now buyers and sellers alike are benefitting from an unexpected boom.

Many people decided for the first time that they could afford to be homeowners, knowing they could count on lower monthly payments. They were able to afford larger homes in better neighborhoods. Some were able to take out shorter-term mortgages and decrease the lifetime cost of owning their homes.

Sellers also found cause to celebrate. As hopeful homebuyers increased in number, a housing inventory shortage, in turn, gripped the market. Sellers found themselves in their own version of the catbird seat and felt more confident setting higher asking prices for their homes. And they’re getting them. Sale-to-list price ratios reached almost 100% in February. The median cost of a home in the US also rose by about 15% year over year.

Are we looking at a win-win situation? The answer is a qualified yes. It all comes down to strategy. If you’re trying to buy a home right now, it’s time to develop yours. Here are a few tips on how to make the most of today’s unusual real estate climate.

Tip #1: Take Advantage of Low Mortgage Rates While You Still Can

While mortgage interest rates have hit historic lows several times over the past year and remain well below several decades worth of norms, economists and other industry experts predict that they may not stay that way for much longer. We’ve seen modest rate increases since March 2021 and that’s expected to continue over the next year. Since even a small rate increase can have a significant impact on your monthly payments, if you can lock in a low mortgage interest rate now, you’ll gain a substantial financial advantage. Want to know how much you can save? Use a free mortgage calculator to compare your payments under today’s low rates and a rate even a quarter-point higher.

Tip #2: Be Prepared to Act Fast

Today’s market puts pressure on buyers to move quickly. According to Redfin, a real estate search and brokerage services firm, 43% of home sellers accepted offers within a week of listing their homes. First-time homebuyers especially may not feel comfortable moving so quickly. But there are steps you can take to make it easier to keep up with the tempo of the market. Having both an experienced realtor and the right mortgage lender behind you can make you a more competitive, confident buyer.

Tip #3: Get Pre-Qualified

If you’ve done even a tiny bit of homework on the mortgage market, you’ve likely heard the term “prequalification.” Prequalification is a service that lenders like Figure offer homebuyers. It’s an estimate of how much you can expect to be able to borrow for your home purchase and what interest rate you’ll likely be offered. Lenders can prequalify buyers under several different purchase scenarios, adjusting, for example, the down payment you might choose to make on a home. Prequalification can save you time by helping you narrow your home search to only those you can realistically afford. It’s also a great budgeting tool. Prequalification can show you exactly what your monthly principal and interest payments will be when you become a homeowner.

Particularly in today’s hot real estate market, many sellers will only entertain offers from prequalified buyers. They, too, want to save time by working only with people who are likely to be able to secure a mortgage. Prequalification elevates you in a seller’s mind and makes you more competitive when it comes to negotiation.

Note that prequalification is not the same thing as preapproval. Lenders don’t typically do a full credit inquiry when they prequalify you. In fact, you should be sure they don’t because a hard credit pull can lower your credit score. Since preapproval does require a hard credit pull—and sometimes documents like pay stubs and tax returns—you’ll only want to do it once: when you’ve got your dream house squarely in your sights and found the lender who offers you to mortgage deal that best suits your needs.  

Tip #4: Understand Your Loan Options

The mortgage market offers buyers many choices. You can select a fixed-rate loan that locks in your rate for the entire time you own your home or a variable-rate loan where your rate might fluctuate every few years based on market conditions. Variable-rate mortgages often come with lower interest rates. But you’re taking a chance on where the market will go. With rates as low as they are now and economists predicting they will rise, the advantage you might gain with a variable-rate loan is likely to be short-term. Most experts are recommending fixed-rate loans to buyers nowadays.

You can also choose the term of your loan: how quickly you pay it off. Shorter-term mortgages typically come with lower interest rates. Because you are paying a larger portion of your loan each month, your payments will be higher with a 10-, 15-, or 20-year loan than with a 30-year loan but the lifetime cost of owning your home will be lower.

Finally, you may have a choice of mortgage programs. Some buyers qualify for government-backed loans, including VA loans, which are available to veterans, active service members, and their spouses. VA loans offer lower rates than conventional loans. Qualified buyers may even be able to purchase a home with no down payment under VA loan rules. What’s more, VA mortgages have more lenient credit qualification standards. So you may be able to get one even if you’ve been turned down for a conventional loan.

USDA loans offer the same benefits as VA loans. Originally designed to encourage development in rural areas, today, properties located in about 97% of the entire US landmass are USDA-eligible, although loans are subject to buyer qualifications. Only low- to moderate-income buyers can participate in the USDA loan program.

Tip #5: Get Your Credit in Shape

Lenders reserve their lowest rates for their most creditworthy customers. That’s why, before you apply for any mortgage, you should be sure your credit score is as high as it can be. Download a free copy of your credit report to see where you stand. Bringing any delinquent accounts up to date can have a significant effect on your score. Even small credit repairs, like closing credit accounts you no longer use, can inch it upwards.

Figure’s mortgage experts have the knowledge and tools to help you weigh the many options available to you when you apply for a loan. Contact us today to raise your mortgage IQ—before making the serious and consequential decision to buy and finance your new home.

Author Bio:

Susan Doktor is a journalist, business strategist, and principal at Branddoktor. She writes on a wide range of topics, including finance, real estate, and government affairs. Follow her on Twitter @branddoktor.

Figure Lending LLC dba Figure. 15720 Brixham Hill Avenue, Suite 300, Charlotte, NC 28277. (888) 697-1506. NMLS ID 1717824. For licensing information, go to www.nmlsconsumeraccess.org. Equal Housing Opportunity.