Is it a Good Time to Buy a Home? Economic Concerns.
For today’s post, I’d like to highlight though many buyers are out there madly shopping for homes in what is currently a seller’s market, a lot of buyers are hanging back wondering “is it a good time to buy a home” due to economic concerns.
Unsure about what the current administration’s impact on economy and housing, jobs and wages, world affairs, stock markets and real estate market fluctuations have many buyers scratching their heads, waffling about a home purchase. Looks good? Smells good?
I’d like to offer some simple but wise advice if you fall into that category.
It’s not always the right time to buy a home for some with regard to savings, bill-paying power, credit and debt-to-income ratios. It is, however, the right time to buy a home in any economy when you buy wisely and the above considerations are within healthy and safe limits.
First off, good Realtors get paid of course, but so do less-than real estate agents. Good Realtors have empathy and concern for their clients well-being and financial health, not putting commission checks above their client’s best interest and why they get repeat business and referrals.
That being said, here’s a word on buying wisely when you’re concerned about the economy and good advice no matter what the state of the union’s economy is.
Don’t bite off more than you can comfortably chew. Wow, that was simple, right?
Well, there’s more to it than that, obviously.
Here are some key points to consider for buying wisely whether you’re concerned about the economy or not.
1 – Purchase for less than your mortgage pre-approval (different than a pre-qualified home loan).
Purchase within 80-90% of your mortgage pre-approval and this will help protect your monthly cash-flow and adding some extra principal payments can also reduce your mortgage term and save you thousands in interest.
It is nice, though, during harder months to have the option of making a minimum payment on a more affordable mortgage.
Use this simple mortgage calculator and see the difference between a $200,000 home loan and a $180,000 loan. Bear in mind, property taxes can vary widely depending on location.
2 – Buy in a neighborhood not in danger of decline, study the neighborhoods real estate market history and consult with your Realtor.
3 – Have six months of bill-paying power, including your full mortgage payment with taxes and insurance.
4 – Making a large down payment doesn’t just increase the chances of getting your offer accepted (there are many things you can do to make an offer more attractive beyond the size of your down payment) but also reduces the size of the mortgage payment and increases cash flow. Equity can also be borrowed against in times of emergency.
In addition to playing with mortgage amounts on the above loan calculator, see what different down payments ranging from %3.5 (like an FHA loan) to %5, %10, %15 and %20 can do for your monthly expenses.
5 – Never buy the best, or the worst, home on the block. The best home will always be subject to other properties holding back the house value, buying the worst home (unless you can afford to really go to town increasing improving and renovating) will mean the property is the least desirable if you intend to sell within a few years and move to another neighborhood or “move-on-up” home.
Most bankruptcies are filed over a mere $300 per month cash-flow issue. Late fees and charges begin to compound and quickly spins personal finances out of control. Following this simple set of guidelines will help keep your budget and your real estate investment safe.
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