Is It Too Late to Buy a Home?

Are you too late to buy a home at a bargain price? Home values are going up all over the country and you may be too late! If you are looking for the perfect time to buy a home, you probably missed it. Similar to the stock market, timing the market is difficult if not impossible. Real estate is cyclical and it goes up and down! The best time to buy a home is when you can afford it. 

Planning

For most people, buying a home is their biggest financial decision. You usually have to save for years to just have the twenty (20%) percent down payment. Since it is your largest investment, you should take the time to do it right. Whether you use a real estate broker or not, you need to do your homework before you buy that first home. You need a plan! What are your requirements? Things such as size, number of bedrooms, bathrooms, amenities, location, price and down payment.

For most people, buying a home is their biggest financial decision. You usually have to save for years to just have the twenty (20%) percent down payment. Since it is your largest investment, you should take the time to do it right. Whether you use a real estate broker or not, you need to do your homework before you buy that first home. You need a plan! What are your requirements? Things such as size, number of bedrooms, bathrooms, amenities, location, price and down payment.

Rent or buy?

Don’t buy a home unless you can afford it! You need a twenty (20%) percent down payment and afford the monthly payment including property taxes, insurance and maintenance. You should not buy a home unless you know you will be there for at least five (5) years. Your payment for rent or mortgage should be equal to your weekly gross pay. Often, people become house poor because too much of their income goes for their mortgage payment, property taxes, insurance and maintenance.

Location, location, location

Where you buy your home determines its value! Things like schools, location, amenities, accessibility, neighborhood, layout, physical condition and security. Many of the reasons for the high home prices are location and supply and demand for the homes. I would rather buy the worst house in a good neighborhood because you can fix the house, but not the location. To the extent a home is an investment, you want the value to hold up and increase over time.

Cash or mortgage

Should you ever buy a home for cash? The simple answer is only if you do not have an alternative investment. Real estate is the only investment where you can leverage your down payment with a low interest loan (mortgage). A home is very different from most other investments because you cannot easily sell real estate.  Another solution is to have a line of credit on the property if you need ready cash. Even in retirement, you may not want to pay off your mortgage or pay cash for your home.

Bottom line, it is a personal decision! Everything depends on your ability to manage your finances. If you have an alternative investment that is secure and reliable, you can use it to pay your mortgage. Most investments earn a better return that the interest rate charged (3-4%) currently. If this scheme keeps you up late at night, then it is not for you. There are tax implications too because without a mortgage, you lose your interest deduction. Again, it is a personal decision.

Get a pre-approved mortgage approval

In any negotiation, you need to give the seller reasons why your offer is best. You want to remove every contingency (particularly financing) in your negotiation. Besides making you a more attractive candidate, you want to find out how much you can afford and your monthly payment. It is an important part of your home buying decision. How can you go shopping for a home without knowing how much you can afford and your monthly payment?

Use a broker and do your research

Taking the time to figure out what you want so you can articulate your requirements to a real estate broker. Brokers are sales people and it is best to give them specific requirement s so they know what you want. Finding a good broker is not easy, but look for referrals from friends and family. I believe in doing my own research when I am looking for a home, car or just an online purchase. It is part of the learning process and an important one.

Final thoughts

Is it too late to buy a home? No, but you probably missed out on some of the bargains. If you are one of those house flippers, you need a bargain because you are paying the bills until it sells. The waiting period can easily eat up all your profit and then some. If your goal is to buy and keep a home as your personal residence for some time affordability is the most important factor. It may take longer to find that hidden gem at a reasonable price, but worth it in the long run. Is it too late to buy a home?

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