Do you have enough money saved up for a down payment? Can you afford to fix any repairs or emergencies? Is now the best time of year to get a really good deal?
These are all important questions to answer before purchasing a new home, and are crucial in order to know if now is a good time to buy. Let’s dive into what you need to know before signing on the dotted line.
Why Do You Want to Purchase a Home?
Before you decide to purchase a home, it’s important to understand why. If you think it’s just the next natural step in life, you’re in for a big surprise. Homeownership is no small thing, and can take up a ton of time, energy and money.
While it could be an awesome investment and place to grow a family, it could also become a burden on your social life and your finances. When I purchased my first home at 23, I had no idea that it would be so costly. I couldn’t travel as much as I wanted to and had to say no to a lot of social activities because the house needed repairs or the insurance bill was due.
Why are you buying this home? Are you going to live in it or rent it out? How long do you plan to stay in it? Each of these questions leads to different strategies, so answering them correctly will determine what kind of loan you’ll need and what size house makes the most sense for your long-term family plans.
Keep an Eye on Housing Prices
When it comes to buying a house timing is crucial. What is the current housing market like in your area? If prices are going up, you may want to close the deal quickly. However, if prices are decreasing, you can take your time and make sure you’re not settling. Beware though, if house prices are falling too rapidly, you may want to wait until they stabilize.
Keeping an eye on the current housing market is important, but it’s also vital you know the best times and seasons for buying a home.
According to the National Association of Realtors, home prices dip an average of $7,000 after Labor Day and usually hit rock bottom in December. Which makes winter the best time to get a good bargain. During the holiday season can be a great time to make an offer for a property, because sellers tend to be more flexible and more generous.
Spring is always one of the busiest times of year, so while there will be more inventory out there, you’ll also have more competition and higher prices. The summer is a very busy time for people relocating for new jobs, or moving for school, so real estate prices are often hiked up during this time of year.
Estimate Your Mortgage Payment and Rates
Most financial institutions require a 20% down payment before you can get approved for a mortgage loan. The more money you have saved up for the down payment, means you won’t be in debt as long and you’ll pay less in interest payments.
You’ll want to shop around for the best mortgage rate to ensure you can get a good fixed rate. And don’t be ashamed to haggle and negotiate for a long-term mortgage with a low interest rate. Something as small as a 0.25% decrease can save you thousands of dollars over the next 30 years.
A good place to compare payments and interest rates is with Zillow’s mortgage calculator. Just enter the price of the home you want to buy (or your current budgeted price), your down payment and any details about your home loan. The calculator will show how much your payments will be and what you can afford based on the current interest rate.
A quick tip: Small banks and credit unions will likely have better interest rates than larger financial institutions. They will also be more flexible with you, so it could be in your best interest to seek out a local bank versus a more well-known national bank.
Plan Out the Next Five Years
What do the next five years look like for you? Do you have a steady job and secure income? Are you planning to have children? All of these events will factor into your decision to own a home. If you’re ready to settle down and be in one place for awhile, buying a home can be a smart move.
However, if you’re buying property because it’s a good deal, or to have as an investment, make sure you understand what you’re getting into. Owning a home is a big responsibility and needs to be decided with care.
You also have to take into consideration all the factors mentioned above, like the current housing market, the time and season, as well as your financial situation. If everything lines up but you don’t’ have the funds in place or a backup if something goes wrong, you could cripple the next few years of your life.
When you finally decide to purchase your beautiful dream home, use these tips and tricks to get the best deal so you can truly reap the rewards of your new investment.
Image Credit: Photo Dean