Why Now Is The Time to Buy a Home: Tips on Buying in Today’s Market
September 15, 2011
Time Is Your Best Investment With Real Estate
The days of flipping a home a for a quick buck are long gone. Buy for the long haul so that market ups and downs won’t matter to you.
If you’re a first-time buyer make sure the home, town, neighborhood, schools make sense for staying put 7 to 12 years. If you’re selling and buying at or around the same time it really doesn’t matter if the market is up or down because it’s neutralized with both transactions. Keep in mind that the real equity by paying off principal isn’t realized until year 5.
For example, on a $300,000 mortgage with a 30 year fixed rate of 4.25%, you would still owe $273,945 after 5 years. After commissions, it’s not even $10K in profit, assuming you sold it for what you paid. On the other hand, after owning the home for 12 years, your principal would be $224,582, yielding almost $60,000 in equity if you sold.
Rates Will Go Up Eventually
We’ve gotten really spoiled over the past few years. When we get back to rates in the 5.5% range, buyers will be in for a rude awakening. That same $300,000 mortgage we mentioned earlier goes from a monthly payment of $1,543 at today’s rate of 4.63% to a $1,703 payment at a 5.5% rate. That’s a 10% increase!
Know What You Can Actually Afford, Not Just What You’re Approved For
It’s normal to want to spend as much as you are approved for, but we always caution buyers to have a monthly cushion for the unexpected things that come up with a home. Homes in New England require ongoing maintenance that may mean certain upgrades or fixes such as roof, furnace, dishwasher, etc. Even new homes have issues you need to plan for.
Use a Buyer Agent for Representation
Make sure you hire a competent agent to represent you in the process. The days of part-time agents or using uniformed agents should be over. In today’s market you should expect a highly experienced and knowledgeable agent who has seen enough good deals and bad deals to guide you through this process. A good agent will not just look for the sale they will tell you if the home needs too much work or if the price is too high for the area.
Owning a Home is a Marathon Not a Sprint
We can’t stress enough to buyers about longer time lines when investing in a home. It is and will always be a great investment but only in the long run. The mortgage interest deduction you receive each year and the ability to pay down the principal are great incentives for buying, not to mention all the satisfaction and security owning a home provides.