It's the right time to buy a home
Housing hasn't been so affordable in decades, and mortgage rates are near historic lows. Here’s what you need to do to buy your dream home.
This post come from Angela Colley at partner site Money Talks News.
I've wanted to buy my first home for a while, and when my landlord told me that my rent was going up to $900 a month, I got serious about it.
So I researched the estimated value of the house I rent now ($160,000) on my local property appraiser website. Then I plugged the number into a mortgage calculator. If I owned this house, my total monthly payment would be $817. In other words, I could pay my mortgage, property taxes, and homeowners insurance for $83 less than what I pay in rent each month.
I'm not alone in thinking it's time to buy. In the video below, Stacy Johnson talks to a real-estate professor who says if you've been sitting on the sidelines, now's the time to get in the game. Then read on for a checklist to get you started.
Post continues below.
But get informed before you do anything. Last year, mortgage website Zillow surveyed prospective homebuyers for a study on mortgages. Homebuyers gave the wrong answers to basic mortgage questions 46% of the time, and 44% admitted they don't understand the mortgage process. So if you're confused, you're clearly not alone. Here are some steps to take:
- Is my job secure? Taking on a huge debt might lead to financial trouble if you lose your job in a few months or years, especially if finding a new job requires relocating.
- Do I plan to stay put? I know I want to spend the rest of my life in my city. If I buy a house now, I won't be selling it for a long time. But if you're not sure where you'll be five years from now, renting often makes more sense. That's partly because using a real-estate agent to sell a house can cost 6% or more. Sell your home before you have that much equity and you'll lose money.
- Am I in transition? Even if you're not changing towns, you might still need to change homes. Life changes like marriage and kids can require a different house.
Your house payment -- including the mortgage, property taxes, and homeowners insurance -- shouldn't exceed 28% of your monthly gross income. To determine the most you can afford each month, multiply your annual take-home pay by 0.28 and divide that number by 12. (Or try MSN Money's calculator.)
Order free copies of your credit reports through AnnualCreditReport.com, then check out "3 tips to raise your credit score -- fast" and "9 fast fixes for your credit scores" for ideas on boosting your scores before you apply for a mortgage. You should check your credit at least six months -- preferably a year -- before home shopping so you'll have time to improve it before applying for a loan.
If you go with an FHA loan, you can qualify with a lower down payment, as low as 3.5% of the purchase price, says HUD. But make sure you have it before you apply. Also be aware that without 20% down, you'll be faced with an extra expense: private mortgage insurance.
Build your team. Buying a house isn't a solo project. You'll need a good lender and a great real-estate agent to get the best deal. Before I selected a lender, I used the Nationwide Mortgage Licensing System and Registry to make sure they were licensed in my state, and checked the BBB and complaint sites for past problems. Then I followed the advice in "Buying a house? Pick the right pros" to find a real-estate agent I wanted to work with.
Know your housing market. As Stacy said in the video, real estate is local. National statistics aren't important; what's happening where you're buying is.
Find the answers to the following questions. Some you can get by reading the local paper, some by contacting your local chamber of commerce, and some by talking to your real-estate agent:
- How long are houses sitting on the market? Your agent can tell you the average number of days it's taking to sell homes in the neighborhood you like. You'd like to see these numbers dropping.
- How many homes are available in the neighborhood? Falling numbers indicate demand is gaining on supply.
- What's the employment picture? Is the unemployment rate falling?
- Is the population growing? If you're in an area with shrinking population, that could be a bad sign.
More on Money Talks News and MSN Money
Is my job secure? Taking on a huge debt might lead to financial trouble if you lose your job in a few months or years...
A job you can guarantee as secure for at least a few years? I think this criteria pretty much eliminates everyone in the country.
I would never want a house payment that ate up 28% of my income - scary! I don't think I ever topped 15%. Houses come with lots of maintenance costs and tend to generate "wants" as well (furniture, appliances, drapes, ... ).
You need to be able to pay more than the suggested payment each month on your house - that way you'll have plenty of flexibility to handle the un-expected and will hopefully pay the dang thing off way early.
If you are a first time home buyer and have done everything in this article, yes it is a great time to buy. On the other hand, we are trying to buy our dream house, but first we have to sell our current house. We're asking $20,000 less than what we paid for it in 2002. The realtor keeps reassuring us that our house shows well, yet still no offers after five months. Great time to buy, terrible time to sell.
I'm sorry, but unless you live in the slums you haven't cut your price NEARLY enough and it is only going to get worse. Expect to take at least a 20% hit to capital and probably more.
Prices aren't going down, down, down, it depends. Maybe but areas are also rising. There's no standardized position on how much your home is gaining or losing value. Find out what your local absorption rate is so you can understand how long it could take to sell and don't buy a new house every 5 yrs so you can falsely fulfill some weird sense of moving up in the world.
There are other considerations such as owners tend to care about their neighborhoods and community. Mortgage interest deduction is a nice perk. A home requires maintenance along with your car and your facial hair. Working on your home is good exercise which we all need. Don't over extend yourself with your new home and understand that one of the basic fundamentals of finance and investing is that the "markets" will exist both up and down. If you are a negative person continue hiding money under your mattress and don't bother considering anything in a long term position.
I've been trying to for the last year n' all my answers are NO. They want me to hit up my 401k & drain it, even tho I have no need to use it to pay my mortgage. (according to their calculations I do tho )
If U can afford to & can get approval, yes...go ahead & buy a home now. Prices are far below where they should be on most. U just hafta dig around some. Don't let the realtors convince U into buying something that's overpriced now. (n' there are many) Some angry homeowners are sticking to their guns & want their price no matter what. I can't say that I blame them. I would too. But for now...hold onto what U have n' buy more !! (IF U can find any, since the banks seem to own a lot of them themselves already & are holding on 'til the prices return to what they were) Eventually, they all will come back up. When ? I dunno. Hopefully, your not too old n' can stick around to wait for it. (I don't think I'm gonna make it)
I think those who have a lot of savings available to spend will make it. An' the poorest of the poor will likely get help. But all the rest in between are gonna lose. An' that includes me. Maybe, most of U too ?
I see that no matter which candidate who gets in & wins the next election, somebody's gonna take a fall. A BIG one !!
This is not the country it used to be. No where close to it. Our dreams have been shattered.Our hopes are no where in sight anymore. It's a land full of depression n' lost hope. We'll just be scraping by n' not really being able to enjoy life at all.
Where has The Land of The Free gone to ? Where are all the Brave ? It certainly isn't showing in the actions of our current Congress.
I'm just sick of all the heartache & heartbreak. U work all your life to get"somewhere" Yet where has that "somewhere" gone ?
I have this huge piece of junk & headache sitting on my back, that I can't get rid of unless I take that $100K loss. Sorry folks, I can't afford to do that.
So I have my own home, but it isn't worth putting another dime into, so I have to live in it as it is. No improvements or upgrades. Let it rot. Only do absolutely necessary repairs n' let it go.
It's gonna make for a lot of homes for sale one day that need a big bunch of upgrades & improvements for sale. Maybe barely worth their after the crash prices.
I'm ticked, cause I'm stuck paying the stupid bank a whole lot more money than my place is worth. Who gets to keep that money ? U guessed right. The Bank !! It's supposed to be MY money n' the bank gets to keep the interest on it. What happened here ? Aren't they "double dipping"?
According to the legal profession, this is not allowed in this country. It's against the law. So whose gonna get arrested 1st ? Hmmmmmmmmmmmm.......???
U might ask...Do I wanna rent ? No, I don't. I just want my house to be worth what I paid for it. Either that....or a law should be passed to force every bank who's holding a mortgage to lower the principle on it until I owe no more than the house is now worth.
Who should pay for it ?
The government. The same one who gave all those banks, all that free money. They had no right to do that. It should've been given back to the worthy homeowners who got screwed !!
Not those who don't keep up with their mortgage payments, but those who do.
I'm sorry about the ones who lost their jobs, but there are too many who just never could afford that mortgage n' the banks were wrong to give them any financing at all.
An' because they did this back then.,.....their rules are tougher, so I can't even qualify to refi anymore.
Thanks a lot U jerks !!
I can prove left n' right that I pay all my bills & will continue to do so. But they don't give a rap. Neither does the government. So they'll just keep taking n' taking n' taking away from me until I have nothing left to live on. An' I'll pay it. All because I'm honest & trustworthy & I pay my bills !!!
If I had to beg, borrow n' steal in order to pay my bills, I would. But what do I get ?
I get a BIG NO !!
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