Many Americans are worried that the economy will suffer a second plunge as it struggles to continue recovering. This fear is enough to make nearly every potential home buyer nervous. However, home purchases during economic downturn periods are not a bad idea. Since interest rates are low, it's much easier to pay a lower total amount on a great home during the life of the loan. Another advantage buyers have is that the market is in their favor because of the large amount of homes available. To determine whether it is the best time for a specific individual to buy, there are several different points to consider.
1. The Purpose Of Buying
It's crucial to spend time thinking about this point. Moving on a whim is a bad idea. To make the best decision, take the necessary time to weigh all of the advantages against the possible disadvantages. Most people want more space, a more prestigious address, a good home to settle down in or they just want to find their dream home. Regardless of the individual reason for planning to buy a new home, it's best to consider all good and bad aspects before making a decision.
2. Interest Rates
If interest rates are low, the total amount paid for the loan is lower. This adds up to a long-term savings that is significant enough it should encourage capable buyers to purchase a home during periods of economic downturn. Since interest rates are expected to stay low for a while, it's best to make a purchase before they start rising again. Those who have excellent credit are able to qualify for a better rate. However, if possible, the best idea is a cash purchase.
3. Family Considerations
Since family members enter different stages of life continually, it's important to take these stage changes into consideration when planning such a long-term purchase as a new home. Families who have young children must consider the various school districts and how well they're rated. If a couple is nearing retirement age, they are more likely to be concerned about what type of neighbors they might have in a different neighborhood. They are also more concerned about making a sound financial decision due to restricted income after retirement.
4. Financial Stability
Since the unemployment rate is high, moving up can mean larger mortgage payments. Moving up may also result in higher utility and upkeep costs. Property taxes are also likely to be higher. It's important to determine whether an individual is ready for such a commitment before making a concrete decision. As a general rule, it's always important to be sure to have an emergency fund, down payment funds and extra money for closing costs.
5. Equity
Since the values of many homes have fallen in recent years, homeowners have been disappointed by losing equity in their homes. It's best to talk with an agent to determine the current value of the home. This is one of the most important issues to consider before deciding whether or not to buy. While this issue is disheartening to many homeowners, those who have owned their property for more than five years usually still have some equity. Talk to an agent to determine the risks and advantages of purchasing a home.
Click here to return to Amity Insurance E-Newsletter January 3, 2012.
