Housing Market: Is it a Good Time to Buy?

Recently, on an interview that I did for Weekend Today in New York, the anchor asked if it was a good time to buy property. I said yes, but only if you buy SMART, especially if you are considering buying a foreclosure. Even though there are ample foreclosed properties on the market, watch out for the baggage that may come with them. Specifically, any damage to the property that you would be responsible for, and buying in states that have redemption periods after foreclosures. The previous owner would have the right to regain their property if they paid the full restitution amount and your expenses, leaving you to find another property to live in.

Some additional tips for buying real estate in this market:

1. Carefully research housing values: Housing values may continue to adjust over the next year, so do careful research when it comes to choosing a home. Ensure you a buying a property in a neighborhood that has not been decimated by foreclosures – it may seem like a deal today, but if the values keep dropping, you may have paid more than you needed to. It may be a while before the value of the property begins to appreciate.

2. Prepare for your mortgage qualification. In today’s housing climate, lenders are getting stricter when it comes to approving a loan. Ensure that you have planned effectively for a meeting with a prospective lender – check your credit score, save generously for a down payment, ensure that your current debt to income ratio is below 35 percent, have hard copies of 6 months worth of bank statements and obtain written verification of your employment history.

3. You’d better shop around: With interest rates being low, shop around for a lender who will provide you with the best terms and incentives for your pocketbook. Additionally, find your mortgage BEFORE you begin looking for a property. Instead of falling in love with a house first, ensure that you secure a loan whose terms are within your means, and then find a house that fits with your financial picture.

4. Opt for a fixed rate: A fixed rate mortgage allows you to plan for the long term. If you are just beginning to budget, having your house payments remain the same over the long term increases the probability of remaining on track. If you have an adjustable rate mortgage, ensure that you project early and accordingly for the financial adjustment.

5. Buy smart and plan for your future: Do NOT buy more house than you can afford, and budget conservatively for monthly expenses. Even you hate the “B” word, it is important to apply a budget to your household finances. Creating a conservative financial plan that allows for a sufficient savings cushion, expense allowance, and a bit of spending money will create a foundation that stands up to emergencies.

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