When you're considering buying a home, it can be difficult to figure out when you should actually take the plunge. Here are some of the personal and economic conditions that will help you know when it's time to call the real estate agent.
You're ready for the committment: When you first start thinking of buying a home, you should ask yourself if you are willing to become your own landlord. You'll have to take on more responsibilities, like performing home maintenance and paying property taxes. And since costs associated with buying a home and moving can add up, you'll want to plan on living in your home for at least five years to offset the initial cost. If you are planning on relocating or can't see yourself living in the same place for five years, you may want to think of other options.
Owning would cost the same or less than renting: Sometimes the cost of renting can be just as much as paying a mortgage and the fees associated with owning a property. Talk to your bank about the cost of a mortgage and study what you are currently paying in rent. If you find that the cost of renting is just as much or more than owning, it's time to jump into the market. After all, it's better that your payments are going toward your own home equity rather than someone else's.
It's a buyer's market: A buyer's market is when there are a lot of homes on the market and not many buyers. This type of market allows you more bargaining room and more of a selection of homes. When there aren't as many buyers competing for homes, you'll have a better chance of being able to negotiate the price down than you would in a seller's market, when there is more of a demand for properties.
Low interest rates are available: A low interest rate on your mortgage loan can save you a lot of money in the long run, so when interest rates are low, you should start thinking about buying a home. Even a fraction of a percentage point can save you thousands of dollars. Having a good credit report can also help you receive a lower interest rate, so try to have your credit scores in good shape when you go to the bank.
You have adequate funds for a down payment: The more you can pay on a down payment, the less you will owe on your mortgage and the less money will be subject to the above-mentioned interest rate. A good starting point for a down payment is at least 5 percent of the total cost of the home, though traditionally (and ideally), a down payment is 20 percent.
You have budgeted for home costs: The key to budgeting for your new home is knowing what you can afford. After you have figured out what you can put up for your down payment and what your monthly mortgage payment will be, remember to take into account homeowner's fees and extra utilities and bills you will be paying. Setting money aside for surprise costs like home repairs is also a great idea, so you're prepared for any surprises down the line.
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