Many people ask me, “How do I know when it is a good time to buy a home?”. What they are generally asking is: what is the real estate market like now, what size loan would I qualify for, what can I get for that amount, and what would be my monthly payments? These are good questions and the answers are very subjective to what your life style is and what can be done going forward to get the best possible house for you for the best price with great financing.
There is no question that housing prices in most markets are appreciating. With low interest rates and houses bought 2004-2008 being at par with today’s prices or underwater, there is a lack of supply on the market. I have spoken with many appraisers who saying it is hard to justify many contract prices with purchase prices being well over recent comparable house prices. Of course there are many different markets and sub-markets where the speed of appreciation and depreciation varies greatly, even in a small geographic area. The best bet is to do an inventory of your current life and what you like or don’t like about places you have lived as well as places you have visited. Speaking with an agent can also help tease out great insights into things you may of not thought about and qualities and observations a third party may be able to add. I have a number of tools to help in the process if you aren’t afraid of a little homework. Then once your essential property qualities have been identified the state of the market for that location and the type of dwelling can be given to you.
Weekly average mortgage rates as of April 11, 2015 were 3.66% for a 30-year, 2.93% for a 15-year, and 2.83% for a 5-year ARM. The financing aspect is so important to the process, but many don’t spend enough time getting educated on the options and impact of different types of loan products. There are loan counselors, lenders, and real estate agents that can give you important information in getting the best loan for you. Some key aspects for planning is your debt to equity ratio, how much you have for a down payment and where it is coming from (savings, gift, etc.), how long you plan to own the property, what monthly payment you are comfortable with, and your credit score. Clients of mine have been pre-qualified or pre-approved in as little as an hour upon submitting some basic information and documents, but the important part going in is to know what you may be looking for. Some lenders don’t do FHA loans, some lenders are approved for programs that offer down payment assistance, some lenders can do low down payment loans with no mortgage insurance when certain criteria is met, etc. Also getting pre-qualified is a hard hit on your credit score and should be done with a select few lenders. For people with little money for a down payment, there are many programs that offer assistance with the down payment, some can be found at downpaymentresource.com.
I have done workshops on this very subject that take over an hour to convey all the factors that one should think about. Some more include your current living situation and how flexible it is, the time and effort to commit to spend each week looking at listings an agent sends and visiting properties, whether a standard move in ready home is your thing or would you want an alternative (tear down, land and new house, renovation project, etc.) and so many more factors.
Anyone even thinking about buying a home, please do not hesitate to contact me. Whether it is 3 years away or in a couple of months there are important things to know, plan for, and start to think about at any stage. Also others that have any type of experience about being ready or not for buying a home, please add to the discussion. Whatever you do, buying a home is the most important investment you will make in your life and please have someone working with you that you can trust and will make sure you get what is best for you.