Ask the Expert
Is it a bad time to buy a home?
Not when you plan for it. When you are thinking about a home purchase you need to do your homework. You need to be buying for the right reasons and you need to know and understand what home ownership involves and that you are ready and able to take on the financial obligation. Start to pay down debt. Learn to live on a comfortable budget and begin to put money aside to save toward the home purchase.
Why is that so important? Because, most of the time the mortgage payment and the true cost of home ownership will be higher than what you are used to paying in rent. Rent is just rent, but property taxes, insurance, repairs, improvements and maintenance are part of home ownership. If you can afford to pay your current rent while “comfortably” saving a few hundred dollars a month, then logically, you can afford a higher housing expense in the form of a mortgage payment. Monthly rent + monthly savings should be roughly equal to your new mortgage payment.
Plan for your future. If you take out an adjustable rate mortgage, then base your budget on how you will handle the payment increase when it comes and avoid loans with payment or rate increases that happen very quickly, like six, twelve or twenty-four months. Stick to longer term ARM programs, three and five years, or more, and nothing with a pre-payment penalty, “balloon payment” or negative amortization. Those programs are designed to compensate the lender for a higher risk loan. Remember, if the loan is that risky for the lender, it’s even more risky for you, the borrower.
Discuss your plans, in depth, with a professional. Your Realtor is a wealth of information about home ownership, financing options and all the information you need to know to choose a city or town, neighborhood, school district and even your commute back and forth to work. Then become that homeowner and enjoy it.
There truly is no place like home!
Barbara Cunningham
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