Our lives have been made challenging by the current economic conditions. At the same time opportunities has also been created for those who are interested in cashing in from the economic downturn. I am not talking about those hedge fund managers – Yes I am talking about you, my friends. If you would like to get into the housing market and never did manage to do so. Now this is a good time to think about it. The mortgage interest rates are low, and the federal government is offering tax credit for house buyers. What’s more? The interest rates for saving are so low that your cash in the bank is actually going down in value days in and days out.
But what do you need to consider before you decide to take the plunge? Here are five tips you need to keep in mind:
1. Consider the Costs and Affordability
It is tempting to put in an offer to buy a house that might be a bit of a financial stretch for you. However what you really need to think about is that interest rates are currently already at a historically low level, it is more likely to go up in the future than going down. When you consider buying a home, keep this in mind, use a mortgage calculator to work out whether you can still afford to repay the mortgage when the interest rates go up by a few percents.
Along with the mortgage payments, you will also need to budget for property taxes and utilities. There are also maintenance expenses, even if you have not made any plan to renovate the house at all. Consider these carefully then make a decision on the maximum amount of money you can afford and stick to it.
2. Buying a Home is a Long Term Commitment
While right now may be a good time to consider buying a home, keep in mind that prices may drop further in the short term. You will only benefit from home ownership if you know that you will be staying put for at least five years. On the other hand, if you see yourself moving in the next couple of years, you may want to hold off on committing to buy for the time being. Unless the profit margins are really high, buying and selling home too frequently, you will lose money to all the costs involved, such as estate agent fee, mortgage fee, tax etc.
3. Think of Your Needs First
If you have done the budget calculation, and decided to make the commitment, you can start figuring out what features are more important to you in a home. Some people like to live in a certain area or close to shopping centers and recreational facilities. People with children will want to find out about child care facilities, schools, etc., in relation to the house they are considering. If these are the features you would like to consider, make a checklist before you start looking around for houses. When you have to make a choice among several houses, you can see which one ticks the most boxes on your checklist.
4. There are no “Dream” Homes in Reality
Everyone including you and me would like to own our “dream” homes. However every “dream” item or feature comes at a price. As long as you have the cash and are happy to pay for them, it is not a problem. You may want to keep in mind that even if you are a lottery winner with 10 million dollars in the pocket, you need to stick to your budget, however big it is. It is perfectly fine to first get into the housing market then move up the property ladder gradually. Look for the homes that meet your needs, don’t put what you “want” in your checklist.
5. You Must Shop Around for Mortgages
There are many options available to home buyers who are looking for a mortgage. Not only are there many lenders offering financing, but there are different kinds of mortgages offered by the same lender. In fact there are too many options, sometimes you just want to close your eyes and point your finger to a random one. Please don’t do that, you will regret imminently. Unlike a credit card you can cut into pieces and throw in the bin, a mortgage is a long term financial commitment, you must shop around for the best deal that is suitable for your medium to long term financial situation. Consider the interest rate, payment options, and amortization period, and any required fees before you sign any mortgage documents.
The recession may translate into a buyer’s market, but you still need to be smart about it. Consider your budget, how secure your job is, and separate the things you must have from the stuff on your wish list to make the right choice for you.