I wrote a blog post in 2010 how ironic, twelve years later I might not need to change much to it? Let me know your thoughts
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The first step in home ownership is to figure out how much you can afford each month. Many first-time buyers look at their current rent and base it what they can afford. The key is to know how much one can afford. Once this is determined the rest is easy.
The key is to know what the budget is in the long run. Do not spend every penny of your income to your housing budget. Remember you still need to eat and there are unexpected costs, or should I say unplanned costs that you need to think about. Even if you need to cut back on your down payment for the sake of having a reserve in your bank account for emergencies it is worth doing that.
In today’s market my advice is to get a Fixed Rate Mortgage 20 to 30 years, locked in. Keep in mind if interest rates drop in the next five or six years you can always refinance. My suggestion is buy now and lock in your interest rates, because my Crystal ball anticipates rate increases.
Let me illustrate my point why you should buy now and not wait:
Let's say the Fed decides to raise the interest rate. Let me illustrate the potential shift in the housing and mortgage markets. The cause and effect is very clear (see my illustration):
Today you buy a $1 million dollar home:
Sales Price $1,000,000.00
Down Payment $ 270,250.00
Loan Amount $ 729,750.00
Monthly Payment on a 30-year fixed at 5.125% $ 3,973.00
Now let us say if prices drop 10% in home values and today's $1 million dollar home sells for $900,000.00, this seems very reasonable. The buyer would think well of course I should wait. Now let me add into this scenario that the interest rate increased only by a modest 1% per cent. Let's look at the numbers.
Sales Price $900,000.00
Down Payment $200,000.00
Loan Amount $700,000.00
Monthly Payment on a 30-year fixed at 6.125% $ 4,253.00
Anyway, you get the idea, why it is better to buy today than wait until prices drop. I find it ironic this was my advice 12 years ago and some people listened, and many did not.
So, with that said the choice is yours. Do you want to live and take your chance as the landlord take advantage of your insecurity?
Wishing you a safe and healthy life and I look forward to your comments. If you are looking for a knowledgeable, focused and goal-oriented Realtor in the Beverly Hills area who will help you achieve your Real Estate goals, please reach out to me directly! If you are looking for a pet friendly Beverly Hills Realtor who can handle and sell the most difficult properties that no one else could, please reach out to me directly!! If you are considering buying or selling a home, a luxury home, luxury investment real estate, luxury vacation homes, or luxury beach properties in Southern California, Los Angeles, Century City, Westwood, West Hollywood, Beverly Hills, Marina Del Rey, Venice or Malibu, feel free to contact me at 310.486.1002 ( m) homes@endrebarath.com or visit one of my websites at https://www.endrebarath.com I contribute a portion of my commission to local animal rescue organizations. Endre Barath, Jr. Realtor at Berkshire Hathaway HomeServices California Properties DRE#01238708
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