Friday, August 12, 2011

Should I Buy?

The amount of material promoting home buying is extensive. Financial and real estate experts from across the country know that today's market conditions are heavily weighted in favor of buyers. Interest rates have never been lower. Home values are more affordable than they've been in decades.

Yet, does this mean now is a good time for you to buy? That depends on a number of personal and financial factors. To really understand if you should enter the market, you must look at what homeownership means.

Irresponsible buying or borrowing could be detrimental to our already fragile economy. Homeownership is a long-term financial responsibility. It brings with it many social, and sometimes financial, rewards, but like any commitment should not be entered into lightly.

First and foremost, how stable is your employment? Has your company been experiencing lay-offs or are they hiring?

Next, do you have at least an 8-month emergency fund in case you get laid off or become too sick to work? If not, things could quickly spiral out of control. Losing your home could spell disaster for your credit, leaving a black mark for 7 years.

Many potential buyers today are unable to attain a mortgage due to bad credit. This has created a multi-month supply of homes for sale. Will you need to sell your current home in order to buy a new one? Today's market, which is full of foreclosures and short sales, is difficult for many sellers.

Yearly homeownership expenses also extend on past the monthly mortgage check. Can you afford property taxes, homeowners insurance, and maintenance and upkeep? Currently, homeowners paying on a mortgage can take the Mortgage Interest Deduction (MID) off their yearly taxes. This deduction is on the chopping block, however. Although, your property taxes would likely be more than you'd save with the deduction.

Real estate can be a way to build long-term wealth. Your home can be one of your largest assets. These do not happen overnight, however. Are you planning on remaining in your new home for at least 3 to 5 years? It will take at least that long for you to break even financially when you sell. You will put cash down to buy it and will pay closing costs to sell it, many times to the tune of several thousand dollars.

What if home values continue to fall? Are you buying for reasons other than building equity? Why do you want to buy? In today's market, housing is affordable. It could be years, however, until your home begins to build equity. By the time you put 20 percent down, pay closing costs, and perform repairs and maintenance, returns can be quite slim.

Owning certain homes in specific neighborhoods can be a sign of status. You should be strongly cautioned that "keeping up with the Joneses" is not a valid reason to buy a home, especially in today's economy. Just ask a good portion of homeowners currently in foreclosure. Over 30 percent of all real estate transactions today are all-cash. While a certain percentage of these are investors, it means that many buyers are purchasing home "within their means."

The majority of homeowners, though, would recommend buying to family and friends. This is becasue homeownership instills a sense of community and stability. Studies have shown that homeowners rank themselves healthier than non-homeowners. Children of homeowners are less likely to become teen parents and are more likely to graduate.

Having a place of your own can be priceless. Just be sure you are truly ready to buy before entering the market.

Published: August 9, 2011

by Carla Hill

Thinking about Buying or Selling?
Call Alvin's Team Today! 877-651-7810
Or visit our website: www.LivingLakeTahoe.com

No comments: