When mulling over the things to consider when buying a house, the process can become increasingly daunting. There are, after all, a lot of things to consider when buying a home. For starters, American economists have scrutinized mortgage interest rates ever since the housing recovery started to gain traction. When it came to buying a home in 2015, experts predicted that mortgage rates would surpass five percent, yet interest rates remained below four percent. While higher than what we had become accustomed to, that was still historically low at the time. Nevertheless, low-interest rates have helped many prospective homeowners actively participate in the housing market. Some people have even made the move from renting to owning out of fear of future rate increases. While not inconsequential, interest rates are just one of the many factors to consider when buying a house. Interest rates are by no means the only factor that should determine when you are ready to buy a home.
According to Casey Fleming, published author and mortgage broker, “Small changes in interest rates don’t make large changes in your payment.” While fluctuations in rates could change monthly premiums, they should not be viewed as the most important factor when purchasing a home. There are simply too many things to consider when buying a house to narrow down your criteria to one or two factors.
What To Consider Before Buying A House
If you are thinking about buying a house, you should ask yourself several questions to determine if it is the right time to do so. Whether you are a first-time homebuyer or a seasoned investor, here are some of the most important things to consider when buying a home:
Duration Of Stay
While often overlooked, the amount of time you plan to spend in the home is one of the most important factors to consider when buying. Essentially, does the duration of stay make it more economical to buy than rent? Of course, there is no simple answer to such a generic question. Each market is different and will require a subsequent analysis to determine if buying is the right choice. That said; it is entirely possible to predict whether or not the time you plan to spend in the house warrants its purchase. “On average, it takes four to seven years to break even on a home, where you’ve got enough appreciation where it can pay you back for the cost of the transaction and cost of ownership,” Fleming says. “If you’re thinking about buying a home, selling it in two years and think it’s going to be cheaper than renting, it’s very unlikely to be.”
The expansion of the economy can improve employer sentiment. However, that does not mean that job security doesn’t weigh on the minds of those that are fortunate enough to be working. How could it not? We are still recovering from one of the worst recessions in American history. Trepidation abounds. Having said that, the last thing you want to think of when buying a home is job security. Uncertainty will almost certainly ruin any prospects of buying a home. There is perhaps nothing worse than buying a home, only to discover that you are unemployed shortly after. So before you make a 30-year commitment to mortgage premiums, make sure you are secure in your employment position.
The down payment on a purchase remains one of the biggest obstacles in the way of potential buyers. Millennials, in particular, have found it difficult to save up a lump sum of money. Not only did the millennial generation graduate from college during one of the worst recessions in American history, but they are also saddled with student loan debt. If that wasn’t enough, underwritings have become more difficult to work with and rents have made it utterly impossible to save up enough money for a down payment. In a move to make down payments more “affordable,” both Fannie Mae and Freddie Mac have announced that they intend to back loans with down payments as low as three percent. Moreover, the Federal Housing Administration (FHA) is planning to drop the premiums owed on mortgage insurance. The move could make owning a home much more affordable for buyers.
As simple as it may sound, the emotional state of a buyer is particularly important during the process of buying a home. That said; homeownership is not for everyone. Buying a home is a huge commitment that not everyone is ready to sign up for. Some still wish to travel the world or find their dream careers. Perhaps even more importantly, owning a home comes with additional responsibilities: responsibilities that not everyone wants to deal with. “Your life changes a great deal when you go from being a renter to an owner,” Fleming says. “When things break, it’s your responsibility to fix them, not the landlord’s.”
Local Market Indicators
As frustrating as it may be, one of the largest factors to consider when buying a house is something you have no control over the local market. When it comes down to it, you may not even be given any options. The market you are interested in may not have any homes in your price range or the right location. On top of that, some market values dictate whether or not owning is even a viable option. While it is becoming cheaper to own than rent in some markets, there are those where renting is justifiable. It all depends on the current state of the particular market you are interested in. So while interest rates are important, it is equally important to own in the right market.
Many people expect mortgage and interest rates to rise in 2018 as the Federal Reserve continues to tighten its monetary policy and make moves towards decreasing its balance sheet. However, this prediction has been spiraling through the real estate industry since late 2016, which makes it difficult to know if and when a notable hike will occur. Over the past year or so, mortgage rates have hovered between 3.9 and 4.5 percent—a less than significant increase. Some experts hypothesize that rates will hit five percent by the second half of 2018, but there has been no official confirmation one way or the other. One thing is for certain, buying a home at the beginning of 2018 will ensure homeowners a locked in a low rate compared to decades past.
Supply And Demand
Because home prices have been appreciating, many hopeful buyers are finding it difficult to purchase within their financial reach. Even current homeowners are opting out of buying newer, bigger, better homes—trading up if you will—for the same reason. This is making it even more difficult for first-time buyers because the supply of starter homes is less than ever before. The increase of both rent and home prices mixed with stagnant wages for many is leading to the combination of high demand and low supply. While this may make it harder for first time home buyers, investors who own passive income properties should benefit from the current state of the market.
Lava Integrity Group, LLC is a San Francisco East Bay Area residential redevelopment company. We focus primarily in Oakland, CA and Concord, CA. Our team is highly motivated, knowledgeable, ethical and resourceful. Qualified to handle any real estate transaction, our dedicated staff is committed to helping people with their real estate needs and making successful deals happen. Our team of professionals has the integrity to follow up on our promises, and the expertise to navigate any transaction to ensure you’re fully informed for making the best decision possible.
When we work directly with a home seller, what we provide can not only make for a smooth transaction, but it can also add up to thousands upon thousands of dollars in savings as compared to selling a home through traditional means. With the ability to directly purchase homes and make cash offers, we can create extremely fast and hassle-free transactions.
There are many creative ways to help you out of any situation. We pride ourselves on our reputation for working one-on-one with each customer to handle each individual situation; and it’s our goal to make each client feel like we achieved a WIN-WIN scenario.
We’d love to learn about your situation and see how we can help. Call (510) 900-4090 or email ([email protected]) us to get a no-obligation offer on your home!
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