Buying a home in the new year
My most frequently asked question and the one I feel is the most relevant in this first blogÂ is, "When is the right time to sell, buy, rent, refinance, etc.".Â My answer is always, "What is your specific situation right now?".Â To give you more detail: Interest rates could be at 12% and prices high and it may be the perfect time to buy your first home.Â This was the case of my parents inÂ the 1970'sÂ when they had to decide if they could afford the 4 bedroom house at $74,000 or the 5 bedroom at $80,000.Â They choose the $74,000 house because it was all they could qualify for at the time and even though they still wish they could have gotten a little more, they still live in that $74,000 house, paid off today.Â Your decision should be based on your now.Â What do you and your family really need?Â What can you really afford?Â What will you be comfortable with 5, 10, 15 Â years from now?Â When deciding on purchasing a home you need to consider the followingÂ 1)Â Can I make the payments now and still live my life as I have been in the past year or two? (granted you may need to give up a latte or two here and there but you shouldn't sacrifice too much or you will resent the purchaseÂ 2)Â Will I be able to make the payments 2, 3, 5, years from now, even if I lose my job for a few months and have to use my emergency fund for monthly expensesÂ 3)Â Will this home fitÂ my family for the next several years (increase or decrease in kids, etc ).Â If you can answer yes to all of the above you are probably ready to purchase a home.Â The 'home buying dream" has changed in the past few years, but if you can look into the future several years andÂ this as a good place for you then this just still may be the right thing for you to do.Â Prices and interest rates are "cheap" now and you may never find these deals again for a long time, if ever.Â Real Estate will go up in value.Â Today, tomorrow, 20 years from now, we don't know anymore do we?Â But everything goes up, that is a given.Â The price of gas will never, ever, be $0.99 per gallon again I'm sure as long as I live, even though inÂ the late 80's/early 90'sÂ when it went to that price we all cringed and sat in lines at the gas stations offering lower prices, or even offering gas at all.Â We have had ups and downs since then in everything that we buy but everything is continually at a steady increase and we can't stop it.Â As far as housing is concerned it's the same thing, if you can justify and afford your payments right now and will be content with the location and spaceÂ for the time being,Â then you are way ahead of the game and should be looking to buy a home now while it's "cheap" to do so.Â Truth is, even if prices decline again a bit, right now everything is "on sale" from previous times and we might not see this drop in prices ever again.Â That said, this is a tough economy.Â If you are concerned about losing your job you should make sure you have more than 3 months reserves as your cushion before locking yourself into anything.Â If you think you might have to move in the next couple of years you shouldn't count on the housing market to go up in such a short time. The market and economy in the past couple of years has changed our contemporary thinking into more modest times and I believe this isÂ really a good thing in the long run.Â Our grandparents bought a home with 20% down and very low debt to income ratios.Â Maybe we need to get our thinking, and teach our children the thinking again that money doesn't grow on trees (or equity lines) and to save and spend only what we can and are willing to do for our futures.