Buying your first home can be a challenging task and can require a lot of time, but it’s an important lifetime investment. Though market trends have indicated that people are waiting longer before investing in a home, home sales are currently on the rise. According to the National Association of Realtors, “Overall existing home sales for 2013 reached a seven-year high of 5.09 million.” As the housing market continues to see an upsurge, Realtors expect mortgage rates to follow a similar pattern. According to the Federal Housing Finance Agency, in 2013, a 30-year fixed-rate mortgage for under $417K had an average interest rate increase of 12 percent in just 12 months’ time. That said, if buying a home is on your to-do list in the next few years, you may want to consider purchasing sooner rather than later as housing prices and mortgage interest rates are predicted to continually increase.
What follows are questions to ask yourself before buying your first home:
Do you have a job you can rely on?
In today’s unstable economy, it is crucial to assess your current financial position before embarking on the hunt for a home. In light of the housing bubble “explosion” of 2008, new federal regulations require more scrutiny from lenders before approving a mortgage. Proving financial ability to pay off your mortgage requires confidence in your current job position. If you’re not confident about where you’ll be salary-wise in two years, don’t take the plunge. Instead, wait until you’re in a more secure career. It is worth it in the long run.
Is it more cost effective to buy or rent in your desired location?
Some perspective home buyers may be attracted to living closer to work for its various conveniences. If your commute to work plays a major role in your hunt for your first home, depending on your job’s location, it may be more cost effective to rent rather buy a home. In cities such as New York and San Francisco where, according to Trulia.com, the home price medians reach nearly $850K, there may be a stronger inclination to rent as opposed to buying a home. In contrast, in cities such as Miami and Atlanta where, according to Trulia.com, home sale price medians average $195K, it may be more cost effective to purchase a home. At the end of the day, it strongly depends on your income level. If $850K meets your budget, go for it.
Does your budget meet your pay grade for a mortgage?
Shopping for a home is exciting, and it should be a positive experience. It’s easy to get caught up in the ecstasy of walking into a home and envisioning your lifestyle in your future home. But at the same time, you shouldn’t let your excitement drive your decision. It’s important to tame expectations and go into the process knowing there’s a chance you could get turned down for a mortgage. Most lenders recommended prequalifying for a mortgage to avoid wasting time pursuing a house beyond your reach. Buying your first home is a step toward the rest of your life. It might take some time, but it doesn’t hurt your wallet to be a smart buyer.