Buyers Shouldn't Wait on Falling Prices

Fear of overpaying for property is common in today's economic environment, especially in places like California where prices continue to be unstable.

If you find yourself on the fence, afraid to pull the trigger, or just down-right scared about jumping into today's real estate market, because you're concerned you'll pay too much, here are some factors to consider:

Waiting for the right time can be expensive. Some buyers would have more equity today, despite falling prices, if they had bought when they were first considering it, instead of continuing to pay rent.

Financing is fickle. Some people who were highly qualified last year are unable to find financing this year because the credit market has tightened or their personal financial situation now makes them an undesirable borrower.

Interest rates are headed up. If prices decline by another 10 percent, but interest rates increase by 1 percentage point, the monthly payment will be the same.

Don't be the last person on the bus. Educate yourself about your buying power and what options are available to you. With prices at an all time low, you don't want to find yourself chasing the market because you weren't prepared to play the game!

For a free Home Buyer's Information Packet, feel free to contact me anytime. Email all requests to thepropertysource@gmail.com.

The First Steps Series-How Much House Can I Really Afford?

As we have been discussing, there are many advantages to buying a home versus renting one. Use this Rent vs. Buy Calculator to help you to compare the costs of renting to the costs of buying a home. But once you've punched the numbers and decide if buying is right for you, HOW MUCH HOUSE CAN YOU AFFORD?! To figure out the amount you can afford view the Affordability Calculator on Realtor.com. Your income, savings, and monthly expenses play an important role in determining just how large a mortgage you can afford.

In many cases, the amount of money you'll spend paying rent can be about the same as or less than the amount a you'll spend on a mortgage. With the tax benefit for homeowners, the savings can be significant.

Ginnie Mae has a Buy vs. Rent chart that shows a cost comparison for a renter and a homeowner over a seven year period. In their example:
The renter starts out paying $800 per month with annual increases of 5%. The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000. After 6 years, the homeowner's payment is lower than the renter's monthly payment. With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years.

Keep in mind that when you decide to become a homeowner, you accept all responsibility for paying for the expenses associated with ownership. Be aware that there are many additional costs to your monthly mortgage payment and you should always include these in your budget estimates:

Here is a list of those extra expenses you'll need to consider:
Property Taxes and Special Assessments
Home/Hazard Insurance
Utilities
Maintenance
Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable. These are common for condos, townhomes, new development communities, gated communities.
Membership Fee: It may pay for recreational facilities (use of a pool or gym) and other services (cable TV).

Once you are able to determine how much house is comfortable for you, do a trial run. Save the amount of your mortgage for at least six months. First, figure out how much buying a home in your estimated price range will cost you each month. DO NOT forget to include an estimate of the extra expenses pointed out earlier. Subtract your current rent (monthly) from the total figure you estimated above. Then on the first day of each month, deposit the difference between your rent and the estimated costs of homeownership. If you can do this every month for six months without being late, feeling stressed, or having to compromise your current lifestyle too much, then you may be ready to take on the financial burden of owning a home!!

Happy House Hunting!