Values have declined close to 33% from the 2nd quarter of 2006 through April 2009. The low interest rates, lower home prices, tax perks and long term advantages of homeownership have first time buyers bouncing off the fence to check out the housing market.
Even though the real estate market wiped out many housing wealth through November 2009, there are advantage to own a home. If enough equity is gained in the home, you could borrow from the home for special needs (college, retirement home, etc.) There is also federal tax advantage which makes the home mortgage debt less costly than other loans.
Mortgage rates are still very favorable at about 4.88% for a 30 -year mortgage. The rates will probably increase but should continue to stay low throughout this year.
Many have bought, as home sales in November accounts ½ of home sales by first time buyers. However, there is a lesson to be learned from the previous housing crisis. Just because everyone is doing it, does not mean you need to buy a home. Buyers must make sure if it is right time for them to buy. Buyers must investigate their job situation first to make any consideration. Economy is getting better, but unemployment is still high on the horizon.
Also, many homeowners got into a mess because they bought way more that what they can afford. To avoid the mistake, first time home buyers should not pay more than 30% of their monthly household take home pay to housing costs (which includes principal, interest, tax, and insurance combined).
Owning a home comes with other added expenses aside from utilities. You are responsible for "everything" that comes with your home. If the A/C does not work, you have to pay for repair, not the "landlord" anymore. You are the landlord. You have to make sure you have rainy-day expenses set aside for many surprises to come (like plumbing, roof leak, etc.)
Getting a low interest rate could be a challenge for first time home buyers. Banks have raised the standard very high to qualify buyers to obtain home loans. Buyer will probably need a FICO score of 720+, full documented income and assets. If buyers cannot meet the standard, they could apply for FHA home loan. With FHA, borrower can put down 3.5% versus higher down payment.
Take time to research for home. First get pre-approved to make sure you know how much you can buy. Next, check the website to search for homes in the area of your interest. Great websites are Zillow.com, Realtor.com, Trulia.com and Redfin.com.
Lastly, first time home buyers should find a Realtor who can be patient and provide the attention needed. You must feel comfortable with the Realtor. The Realtor should be accommodating and show homes that fit your needs, and price range. They should not pressure you in anyway. Ask a lot of questions during the purchase process. I recommend referrals from relatives, friends and co-workers who have bought and had a good relationship with the Realtor.
Comments(0)