4 Tips for Finding (or Creating) Your Dream Home in a Tough Housing Market

It helps to be adaptable if you're shopping for a house in today's market.

Trying to buy a home right now is no joke. Most properties receive multiple offers, with some buyers willing to eat the difference between what they pay and what a property is worth. If you rightly view a home purchase as a business transaction, do not give up hope. It is possible to pay a fair price and build equity immediately.

Before heading out, take time to devise a plan. These four tips can help you get started.

1. Get your financing in place

Over the past six weeks, mortgage rates have been all over the place. Shop around to find out which lender offers the best rate and terms for the mortgage you need. Once you've found a lender, get pre-approved for a loan. If you're not sure which lender you want to work with, it's okay to be pre-approved by more than one. Here's what you can expect to be asked to provide:

• Pay stubs and employment details, including the name and address of your employer
• Bank account statements
• A list of your existing debts or financial obligations, such as alimony or child support

Using this information and the information on your credit report, lenders will determine whether they feel secure loaning you money.

It's important to note that the credit check will ding your credit report by several points, but it shouldn't be much, and your score will quickly rebound once you make a few on-time payments. No matter how many different mortgage lenders check your credit report, it will count as one hard credit inquiry. That's because the credit reporting agencies understand that people shop around for the best loan and that several lenders may pull reports. If you can complete your loan shopping within two weeks, it will be apparent to the credit reporting agencies that you're seeking the best loan available.

Once approved, lenders will provide you with a pre-approval letter indicating how much you're eligible to borrow. Having this letter on hand is essential for your home search. Not only does it give you an idea of how much you can spend, but it also indicates that you're serious about buying.

2. Choose the right agent

When buying or selling a home, the right real estate agent can make all the difference. Here are some of the characteristics of a great agent:

• Listens carefully to what you want in a home
• Respects your spending limits and does not pressure you to raise your budget
• Returns your calls, texts, or emails promptly
• Knows the area market well

Let's say you find a place to buy, but it was built during the Truman administration, and you're concerned about its condition. If you want to write a home inspection contingency into your offer, a great real estate agent will do that for you. They may let you know that other people are not including contingencies or that adding a contingency may reduce your chances of buying the house, but they will support whatever you decide.

3. Look for stragglers

Many homes are selling the day they hit the market. Unless you're comfortable getting into a bidding war, you may want to pay special attention to homes that have been on the market for 14 days or more. While a lingering home in today's market is not the norm, that does not necessarily mean there's something wrong with the property. Buyers may have passed it by because it's dated, has zero curb appeal, or needs a little TLC.

If you find a straggler you think you may be able to work with, that's one way to buy a home in a red-hot market without losing your shirt.

4. Reimagine your dream

Most house hunters have a pretty clear idea of their dream home. You'll be ahead of the game if you can let go of that dream and adopt a new one. Turnkey properties with all the bells and whistles draw a crowd, and that's the type of home that inspires bidding wars.

If you're stuck in a bidding war, you'll be sure to pay top dollar. You may also feel pressured to give up essential contingencies, like a home inspection. If you can look at a less-than-perfect home and imagine how you would make it your own, you're less likely to run into competition. Better yet, you may be able to buy the property for less than the asking price.

Rather than overpay for a house, why not buy one at a fair price and use the money you saved to make changes? If you're short on cash, Fannie Mae, Freddie Mac, FHA, and VA loans offer their own versions of a renovation mortgage.

Rehab mortgages allow you to borrow enough money to buy a home and renovate, all in a single mortgage. Depending on the type of loan, these programs are known by different names. For example:

• Fannie Mae: HomeStyle Renovation loan
• Freddie Mac: CHOICERenovation loan
• FHA: 203k
• VA: VA Renovation loan

With the right loan and a little imagination, it's possible to purchase a property that's not quite what you imagined and make it your dream home.