The American dream of buying a home is a multi-step process. But the first, and most pivotal decision involved, is when to buy your first home. For first time buyers hearing about the ups and downs of the housing market can put them into a state of fear and inaction. The often ask- is this a bad time to buy? Can I qualify? Will my interest rates soar? But realtors and mortgage brokers will all tell you that the right time to buy is contingent on more factors than the national, or even local housing economy.
A Solid Investment
One of the reasons that realtors tout home ownership as the investment of a lifetime is because your home will appreciate over the time you live there. While an investment property seeks a different type of return, the outcome is the same. Most people will eventually sell their home for far more than they paid for it. Keep in mind personal factors like the livelihood of future moves, income, and growing families. A good realtor will take all these factors into account when helping scope out your ideal home.
I you are already paying rent, it generally makes sense to turn that outgoing cash each month into an investment that will accrue equity immediately. Use the knowledge of local realtors and mortgage lenders to get a feel for the local market. This will be more pertinent than national trends for your immediate needs.
High Interest vs. Interest Deductions
Realtors and mortgage lenders report that high interest rates are one of the biggest areas of concern for people buying a home for the first time. As national sales have dropped in the first half of 2007, lending standards have tightened, and obtaining low interest rates has gotten more difficult- especially for lenders with poor credit or little money for a down payment. According to the National Association of Realtors, high priced homes are selling strong, and the overall real estate sales are expected to increase gradually in the second half of the year.
How does this affect the right time to buy? Obviously, if your credit is poor and you have little cash, this could make obtaining a loan challenging. But realtors report that many first time home buyers find themselves needing to buy a home due to a relocations, or new baby in the family. Does this mean the times just not right, and they should rent another year or two to get cash save up? Maybe.
A good guideline realtors give is that no more than 33% of your income should go towards housing. So if getting into a home right now would really stretch those numbers, responsible realtors and mortgages lenders advise taking some time to get your credit in shape and save up some cash.
On the other hand, if you can swing a reasonable down payment a slightly higher interest rate than was offered a year or two ago isn’t really a reason to put off buying. Realtors say this is a great time for buying since the market is flooded with reduced priced homes. And you actually can benefit from mortgage interest deductions. Ask your realtor, lender or other real estate professional to explain the how mortgage interest is completely deducted from your taxes.
Still Unsure?
Just remember- look at the numbers. The best realtors will lead you towards homes that are in your price range- but you need to know what that really is. Realtors and mortgage lenders can only give feedback on the information you give them. By considering your lifestyle, income and desires, only you can really determine now is the right time for buying a home.
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