It's no big secret that the best time to buy a home is
during a down market (much like the one we're currently experiencing), but does
that necessarily make it the right time for you to buy.
There are many more factors that come into play in
determining when is the right time for you to make the leap into purchasing a
home, whether it's your first, second, or third. To give yourself the best
chances of having your offer accepted and your loan approved, consider the
following questions, the answers to which will give you great insight into your
readiness (or lack thereof) to buy now as opposed to sometime down the line:
- Have
you research your market? The
shape of the overall housing market gives you only a broad and generalized
understanding of home values across the country. But specific markets
individual states, counties, towns, and neighborhoods may still fluctuate (and
diverge) greatly in any market.
Therefore it is of the utmost importance that you do your due diligence and
research home prices and values in the exact geographical area you're
interested in. Don't just assume that housing prices are down across the board
so you're free to lowball on your bid or you run the risk of turning off a
prospective seller. By the same token, even in a down market, it's still
possible to pay too much for a house as well. Information is power. Get it, and
use it.
- Do
you already have the money for downpayment and closing costs? 100% loans
were already absurdly expensive before the subprime mortgage crisis. Now
they're practically unheard of. If you need to take out a loan to cover downpayment
and/or closing costs, maybe you should put a little more attention into your
savings plan first. That way, you'll be sure to get a mortgage you can afford.
- Can
you afford the house you're seeking? Dream big, sure. But act rationally if
you want to avoid foreclosure happening to you. That means making sure your
total debt, including the housing payment you're considering taking on, isn't
more than 30-40% of your gross monthly income. Otherwise before too long you
may find yourself living in the doghouse.
- Have
you taken incidentals into account? Incidental expenses in terms of home
ownership include maintenance and repair, taxes and insurance, utility costs,
transportation for your commute, etc. When you're factoring how much you can
truly afford to spend per month on a home, do yourself a favor and be sure to
factor these expenses into your equation or you may find yourself coming up
short.
- How
is your credit? A good way to avoid setbacks in your mortgage application
process is to know your own credit situation before you apply for a loan.
Finding out that you have poor credit (whether legitimately or through some
error on one or more of your credit parts) after the fact is not only a blow to
the ego, it can also cause you to lose the home you have your heart set on.
Don't let that happen to you.
- Have
you made any major purchases recently? Buying a home immediately after
buying a new car or taking an expensive vacation or having a new baby is not
only ill-advised, it's also quite difficult to accomplish. If you've recently
made a major purchase, consider waiting a short while to get your credit and
finances back up to par. You'll thank yourself for your patience later.