The Housing Market Could Cool Off This Summer: 3 Ways for Buyers to Prepare

Here's how to gear up for a potential buying opportunity.

Right now, home prices are through the roof -- and they've been that way for months on end. But there may be some relief in sight.

Mortgage rates have risen dramatically since the start of the year. If rates keep climbing, it could push buyers out of the market, thereby lessening the competition. And once that happens, home prices could start to fall as the gap between available housing supply and buyer demand narrows.

Then there's a potential recession to consider. Many experts are already warning of an imminent economic downturn. That could, in turn, prompt buyers to pull out of the market this summer. And if that happens, it could lead to home prices coming down.

Now to be clear, we shouldn't expect home prices to plunge. The housing market lacks supply in a very big way, so even if buyer demand wanes, we shouldn't expect a real estate crash. But homes could become more affordable in the coming months, so if you're looking to buy, it pays to make these three key moves.

1. Shed some credit card debt

The less money you owe on your credit cards, the more your credit score might improve. And that's important, because mortgage lenders will look at that score to determine how risky a borrower you are. The higher your score, the more likely you'll be to get approved for a home loan, and at a competitive rate. 

What’s more, mortgage lenders also look at borrowers' debt-to-income ratios when assessing loan applications. The less credit card debt you have outstanding, the lower that ratio is apt to be. And while a low credit score isn't what you want, a low debt-to-income ratio is very much a good thing, since it means only a small percentage of your income is allocated to existing debt obligations. 

2. Check your credit report

You might think your credit is in decent shape. But there could be a red flag on your credit report you don't know about. Or, worse yet, there could be a black mark on your credit report that's actually a mistake. 

That's why it pays to access your credit report before applying for a mortgage and make sure everything checks out. If there's a delinquent debt on there you don't recognize, you'll have time to resolve the issue before it hurts your chances of getting approved for a home loan.

3. Sock away extra down payment funds

Although home prices could drop this summer, we shouldn't expect property values to go from sky-high to ultra-low overnight. That means you'll still need to bring a decent pile of money to the table when you go to close on a mortgage, so to that end, do your best to boost your cash reserves.

Cutting back on spending is one way to go about that, though given inflation, it's easier said than done. A more viable solution may be to pick up a side job you hold down temporarily. Having extra income could also make it easier to cover the cost of moving if you do manage to buy a home in the next few months.

We can't say with certainty that the housing market will cool down this summer. But since it's a possibility, it pays to put yourself in the best position to buy a home by checking these key items off your list.