– Jessica, Sparks
Dear Jessica: You are very wise to check into buying a home, especially in light of your years of frustrations from being a renter. Buying a home is always a good investment if you plan to stay in the area for the next five years. In fact, it is the best investment most families will ever make. It is safer than the stock market and a long-term investment with some historically great returns. Here are some answers to a few commonly asked questions about buying a home and why now is a perfect time to buy for renters and investors.
Q: Should I wait until home prices go even lower to buy?
A: No; just as no one can accurately predict the peaks and valleys of the stock market, the same holds true for housing. If you wait for what you think is the absolute best deal, you could end up waiting for years. All the market fundamentals show that now is the best time to buy. Home prices are at the lowest interest rates, near a historic low, and there are plenty of homes to choose from.
Q: Interest rates keep going down. Should I wait for rates to drop even lower before I buy?
A: Interest rates for a 30-year fixed mortgage are currently below 5 percent. This is extremely favorable for buyers, but waiting to time the market is a dangerous game. Even those who follow the market for a living cannot predict when interest rates will bottom out. If they could, they would all be multi-millionaires.
Home prices don’t necessarily move in unison with interest rates. So, if you decide to wait to purchase a home and the price dropped $10,000 from where it is today, you could still end up losing money. How? If interest rates were to move up by half-a-point during the period, the savings on the reduced home price would be more than offset by the higher monthly payment you would be making over the life of the loan.
Q: I am a first-time homebuyer and still can’t afford the type of home that I want. Is it best to wait, keep renting and hope that prices will drop even more?
A: If you continue to wait, you might never be able to afford to get into the housing market. Even as home prices are currently moderating or falling, rents continue to climb. When you buy a home, you are also purchasing price stability, knowing that you will pay the same monthly payment for the life of your 30-year, fixed-rate mortgage.
Once you become a homeowner, you will be able to take advantage of the tax deductions that homeownership offers, and you begin to build equity in your home.
With so many homes on the market to choose from, your best strategy may be to scale back your expectations for your dream starter-home. After a few years, you can sell your starter home.
Your equity gains will help you get into a move-up home. The sooner you make the jump from a renter to a homeowner, the quicker you begin to create and build up wealth for your family.
If you’re like Jessica and have more questions than answers about buying, you’re in luck. From 6 to 8 p.m on July 28, a panel of real estate professionals (including myself) is holding a seminar that will cover the issues that first-time buyers, move-up buyers and investors ask about most, such as short sale versus foreclosure, how to qualify for a home loan, available loan programs, a listing of available homes in our area with price ranges and an overview of the current market. You’ll also have a chance to get all your buying questions answered. RSVP for the seminar by calling 351-5117.
Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.