If you're throwing your hard-earned money away on rent each month, putting that same amount towards your own home could be an incredible advantage. However, it's also imperative to consider whether you can afford the costs associated with a mortgage, property insurance and potential repairs that might be necessary in the future.
Buying a starter home doesn't have to feel like an overwhelming experience. Here are some things to think about that might help you make a more informed decision.
Evaluating Local Prices
It's not uncommon for home prices to be unusually high in some areas, but to be relatively low within a specific city. It can be tempting to move forward with purchasing a home even in the midst of spiking prices in an effort to ensure that prices won't rise even higher. In some cases, higher market trends might be an indication that a downturn is within the near future. While the general rule of thumb for investing is to 'buy low, sell high,' forecasting the right timing to invest in the real estate market isn't always as straightforward. The most efficient way to evaluate local housing prices is to consult with a local Realtor who has adequate experience. This is an important step that could help to safeguard your financial investment.
Assess Your Personal Goals
How long do you anticipate staying in your home? Do you have plans to relocate within the near future, or are you looking to settle down for a decade or longer? What goals do you have for your new home? If you're planning on raising your family there, you should be relatively protected even during the midst of a fluctuating market. For example, even if interest rates spike a year after you've purchased a new home and it triggers a drop in demand, it most likely won't have an adverse effect on your home's equity if you're planning to stay there indefinitely. On the flip side, if you decide to move a year after you've purchased and interest rates begin to soar, you could take a financial hit.
How Much of a Down Payment Can You Afford?
Normally the minimum down payment will come from your own savings and resources, however you may receive a gift from an immediate relative that can be used as well. The amount your down payment will affect the price of the home you can purchase, the size of your mortgage and your monthly payment, and as well the amount of insurance you will pay. Work with a mortgage professional, they have expertise in these areas and can advise you!
The Bottom Line
The number of years that you plan to live in your home will make a significant impact on whether you might benefit more from renting for a while or not. Determining whether it's the right timing to buy might not have as much to do with the economy as it has to do with your personal goals and budget.