When it comes to buying a home, there are a lot of unknowns, especially if you are a first-time homebuyer. It’s an investment that needs thoughtful consideration, as there are a lot of factors at play.
With the current financial climate, it can be difficult to determine whether you should follow through on your plans to buy a home this season. Many people have decided to wait another year to make the big purchase. However, there are still plenty of reasons why buying a home can still be a reality now. Here are some helpful tips to consider if you are thinking about purchasing a home.
Housing Market Health Analysis
The health of the housing market is on many people’s minds – and for good reason! The 2008 financial crisis made a lasting impression on the housing market and those affected. However, even though the housing market is not necessarily unaffected by the COVID-19 pandemic, it has remained very strong, with home sale prices in many Metro Atlanta areas hitting all time highs. People are still selling their homes, but there are many more buyers than sellers. It is a competitive market and will remain so as long as interest rates remain at or near record lows.
What does this mean for buyers? Is it worth paying top dollar now or do you wait until the market stabilizes and shifts back towards a buyer's market. That depends on your specific situation and motivations. But it may surprise many to learn that your monthly payment may be lower now, than later. With conventional rates around 2.75% for many buyers (on lower fro some VA and FHA buyers) a home with a premium $350,000 price tag, 5% down payment and average local taxes and insurance, will cost about $1690 per month.
As rates increase, the market will shift back to more of a buyer's market. That same home may not garner a premium and only sell for $330,000, but as rates get back to 3.5% (still historically low), the payment on the $330,000 price is actually $50 more per month.
Have You Thought About A Down Payment?
Outside of the housing market, one of the most important factors in answering the question, “Is now a good time to buy a house?” is whether you have enough money saved up. Many lenders suggest you to pay at least a 20% down payment on your home to limit risk for both you and them.
However, if you don’t want to put 20% down, you can get a loan for as little as 3% down and pay private mortgage insurance (PMI). Monthly premiums for PMIs vary, and are based on the amount of the down payment and credit score. However, if you were not anticipating a PMI being added to your monthly payment, make sure to speak with your lender about how much your PMI will be.
What Type of Mortgage Do You Want?
Beyond the upfront costs, it’s also essential to understand how mortgages work and which one works best for you. There are several types of fixed rate mortgages available, including a Conventional mortgage, FHA, VA, and USDA. If you receive a fixed-rate mortgage, your payments will stay the same over the life of the loan. This is a good thing for homeowners as it makes payments predictable.
Some lenders, though, offer adjustable-rate mortgages. Buyers may seek this out, especially if rates are expected to drop, but it makes your mortgage payments less predictable. If rates go up, you may find yourself making larger payments than you expected.
The most important step is to make sure you get pre-qualified for a mortgage. This will help you determine what program will meet your needs and be the best option for you and your family.
What is Your Credit Score?
If you’re asking yourself, “Is it a good time to buy a house?” you should also be asking yourself what your credit score is. Your credit score serves as an indicator to lenders as to how safe it is to approve a loan, however, it is not the only thing taken into consideration. Lenders take into consideration the type of program and lending criteria when considering a qualifying credit score, as well as down payment.
If your score is not quite where it should be, talk to your lender about steps you can take to improve it. The number one thing to remember is reducing the amount of debt you have and continuing to make on-time monthly payments on your credit cards, loans, or lines of credit. Avoid applying for any new loans or types of credits, as recent credit inquiries can knock down your score.
Think About Your Employment
Consistency is key, especially when purchasing a home. If you find yourself unemployed or temporarily out of work, then right now may not be the right time to take the leap. However, if you are still bringing home a paycheck and feel confident in your financial future, then buying a home may be an option for you. Buying a home is an investment, and ensuring you have a stable income is imperative.
Do You Have an Emergency Fund?
Having an emergency fund is more important now than ever. When thinking about purchasing a home, make sure you have extra funds set aside in case you find yourself temporarily out of work. This will give you some “cushion” in case anything arises in the future, so you will be able to keep up with mortgage payments.
Furthermore, if you’re trying to decide to buy a house now or wait, you should consider whether you’re ready for the responsibilities of homeownership. As a renter, you likely relied on a landlord or property management company to handle repairs and maintenance. As a homeowner, you take on these responsibilities and you want to make sure you have an emergency fund that can cover these expenses.
Take a Look at Prices in the Market You Want
With the market quickly changing and the Atlanta Metro seeing a sharp home value increase in many parts, keep an eye on the neighborhoods you are looking to buy in. Take time to look at the market value of the houses in that neighborhood so you can make a well-informed decision. This will help you determine if your price range is too high or even too low, so you can find the best house within your means.
If you commute for work, carefully look at the mileage you put on your car. Spending an extra $10,000 to be 10 miles closer to work will be less expensive over 5 years than car fuel and maintenance costs for the additional mileage.
Find a Supportive Financial Team
Something else to consider is to find a team of people who are going to support you. As your REALTOR®, I work closely with your lender. If you do not already have a lender, I can suggest the right lender to fit your specific needs.
With the current financial climate, it can be difficult to determine whether you should follow through on your plans to buy a home this season. Many people have decided to wait another year to make the big purchase. However, there are still plenty of reasons why buying a home can still be a reality now. Here are some helpful tips to consider if you are thinking about purchasing a home.
Housing Market Health Analysis
The health of the housing market is on many people’s minds – and for good reason! The 2008 financial crisis made a lasting impression on the housing market and those affected. However, even though the housing market is not necessarily unaffected by the COVID-19 pandemic, it has remained very strong, with home sale prices in many Metro Atlanta areas hitting all time highs. People are still selling their homes, but there are many more buyers than sellers. It is a competitive market and will remain so as long as interest rates remain at or near record lows.
What does this mean for buyers? Is it worth paying top dollar now or do you wait until the market stabilizes and shifts back towards a buyer's market. That depends on your specific situation and motivations. But it may surprise many to learn that your monthly payment may be lower now, than later. With conventional rates around 2.75% for many buyers (on lower fro some VA and FHA buyers) a home with a premium $350,000 price tag, 5% down payment and average local taxes and insurance, will cost about $1690 per month.
As rates increase, the market will shift back to more of a buyer's market. That same home may not garner a premium and only sell for $330,000, but as rates get back to 3.5% (still historically low), the payment on the $330,000 price is actually $50 more per month.
Have You Thought About A Down Payment?
Outside of the housing market, one of the most important factors in answering the question, “Is now a good time to buy a house?” is whether you have enough money saved up. Many lenders suggest you to pay at least a 20% down payment on your home to limit risk for both you and them.
However, if you don’t want to put 20% down, you can get a loan for as little as 3% down and pay private mortgage insurance (PMI). Monthly premiums for PMIs vary, and are based on the amount of the down payment and credit score. However, if you were not anticipating a PMI being added to your monthly payment, make sure to speak with your lender about how much your PMI will be.
What Type of Mortgage Do You Want?
Beyond the upfront costs, it’s also essential to understand how mortgages work and which one works best for you. There are several types of fixed rate mortgages available, including a Conventional mortgage, FHA, VA, and USDA. If you receive a fixed-rate mortgage, your payments will stay the same over the life of the loan. This is a good thing for homeowners as it makes payments predictable.
Some lenders, though, offer adjustable-rate mortgages. Buyers may seek this out, especially if rates are expected to drop, but it makes your mortgage payments less predictable. If rates go up, you may find yourself making larger payments than you expected.
The most important step is to make sure you get pre-qualified for a mortgage. This will help you determine what program will meet your needs and be the best option for you and your family.
What is Your Credit Score?
If you’re asking yourself, “Is it a good time to buy a house?” you should also be asking yourself what your credit score is. Your credit score serves as an indicator to lenders as to how safe it is to approve a loan, however, it is not the only thing taken into consideration. Lenders take into consideration the type of program and lending criteria when considering a qualifying credit score, as well as down payment.
If your score is not quite where it should be, talk to your lender about steps you can take to improve it. The number one thing to remember is reducing the amount of debt you have and continuing to make on-time monthly payments on your credit cards, loans, or lines of credit. Avoid applying for any new loans or types of credits, as recent credit inquiries can knock down your score.
Think About Your Employment
Consistency is key, especially when purchasing a home. If you find yourself unemployed or temporarily out of work, then right now may not be the right time to take the leap. However, if you are still bringing home a paycheck and feel confident in your financial future, then buying a home may be an option for you. Buying a home is an investment, and ensuring you have a stable income is imperative.
Do You Have an Emergency Fund?
Having an emergency fund is more important now than ever. When thinking about purchasing a home, make sure you have extra funds set aside in case you find yourself temporarily out of work. This will give you some “cushion” in case anything arises in the future, so you will be able to keep up with mortgage payments.
Furthermore, if you’re trying to decide to buy a house now or wait, you should consider whether you’re ready for the responsibilities of homeownership. As a renter, you likely relied on a landlord or property management company to handle repairs and maintenance. As a homeowner, you take on these responsibilities and you want to make sure you have an emergency fund that can cover these expenses.
Take a Look at Prices in the Market You Want
With the market quickly changing and the Atlanta Metro seeing a sharp home value increase in many parts, keep an eye on the neighborhoods you are looking to buy in. Take time to look at the market value of the houses in that neighborhood so you can make a well-informed decision. This will help you determine if your price range is too high or even too low, so you can find the best house within your means.
If you commute for work, carefully look at the mileage you put on your car. Spending an extra $10,000 to be 10 miles closer to work will be less expensive over 5 years than car fuel and maintenance costs for the additional mileage.
Find a Supportive Financial Team
Something else to consider is to find a team of people who are going to support you. As your REALTOR®, I work closely with your lender. If you do not already have a lender, I can suggest the right lender to fit your specific needs.
