This is a great question and one that seems to be on a lot of people’s minds lately. Admittedly it is an attractive market. Home prices are lower, mortgage rates are historically low and there is an oversupply of homes on the market. Consider only those facts and the answer seems very simple: Buy now! Unfortunately many buyers fall into that trap and forget to take ALL facts into consideration. Before deciding to purchase, ask yourself the following questions:
Q: How long do you plan to live in your new house?
A: If you did not say 3 years or longer, then you need to seriously consider renting. Keep in mind that the average home appreciates between 1% – 3% per year. Not 10% – 20% like they briefly did in ’06 – ’08.
Q: How much money do you have saved up to use for a down payment?
A: In this volitale market you should aim to put down 10% of the purchase price as down payment. Most lenders are requiring this, but there are still a lot of 3.5% – 5% down payment programs out there. There is certainly a time and place for the lower down payments, but if you can afford it, go with the higher number. This will give you some security that you will not have to write a check at closing when you unexpectedly get transferred and have to sell your house earlier than expected!
Q: Have you considered the additional costs associated with owning a home?
A: This is often over looked by eager home buyers, but is very important to consider. When renting, there is typically very little additional cost other than rent and utilities. As a home owner, you will be faced with additional costs that can sometimes be significant. Costs to consider: lawn maintenance, home maintenance, insurance, property taxes, garbage pick-up, HOA dues, and special assessments.
If you have thought through the questions above and feel like owning a home is the right move, then congratulations. Home ownership can be very rewarding and offer some nice tax breaks! Mortgage interest is typically tax deductible and if you run a home business you may be eligible for addtional deductions. The most important thing to remember when purchasing a home is that you are making a long term investment.
For more information, please visit our website at www.theparkercompanyre.com.