Home Ownership Today; To Buy or Not To Buy?

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Information sourced from Genworth Financial

Folks today are presented with the best interest rate environment in over 50 years. That’s right, you can get a home loan for as little as 4%. Compare that with the late 1970’s when mortgage rates were upwards of 12%. With those historically low mortgage rates, shouldn’t everyone buy a home? Maybe…..

Or maybe not……There is another side to the purchasing decision; the home price. It doesn’t matter if the interest rate is 2%, if you have no down payment and can’t afford the monthly house note, then buying a home is a bad idea. A home purchase is only a good idea if you meet basic criteria.

What’s a potential home buyer to do?

Home Buyers Checklist

Consider buying a home if you meet these criteria:

Expect to live in the home for 5 or more years. We made the mistake of buying a home, and moving two years later. That was an expensive $25,000.00 lesson :).

Saved a reasonable down payment. I recommend 20%, buy I understand that is no easy feat. The buyers of our home last Spring had an FHA loan with a very small down payment. Fortunately, they had steady and well paying jobs which could easily cover their mortgage payment.

Less than 28% total debt payments including the mortgage payment. Calculate by adding up all monthly debt payments and divide by your monthly gross (or net if possible) income.

Steady employment which is likely to continue.

An emergency fund of 3+ months of living expenses on top of the down payment.

Motivation and resources to fix the leaks, replace the worn out dishwasher, and keep the property well maintained. Some folks aren’t cut out for home ownership and would rather call the landlord when the toilet gets backed up.

The Takeaway

It’s only a good idea to buy a home if you are financially and emotionally ready to tackle all that goes along with being a homeowner. My grandparents always lived in apartments and on the bus lines. No home ownership and access to public transportation. In some ways, it makes life simpler.

Housing for many living on the coasts is simple financially out of reach. International mortgage trends are a bit different than those in the USA. In fact, in some countries, you must pay cash in order to purchase a home. In others, you may only lease the land for a limited period of time.

If you decide to take the plunge and buy, be smarter and safer with mortgage insurance. Make a detailed budget, including a replacement fund for those unexpected repairs, before deciding to purchase. Look thoroughly, negotiate hard, and make sure to have your future home inspected before you commit.

We just moved across country and bought a beautiful condominium (short sale) in an area which would have been out of our reach a few years ago. As with most of our prior homes, we purchased a home for an amount less than we could afford. And we hope to be here a long time.

Are you considering buying a home or condo next year?

 image credit; audiovisualphoto