Thursday, September 10, 2009
Buying Your First Home in Today's Market
Hope all is well on this almost end of the week day.
So, I work in the mortgage banking industry and get to see this stuff every day, but none-the-less, I would like to indulge myself in this topic.
Most finance websites and finance "gurus" are saying that right now is the time to buy your first home because of the $8000 tax credit and because of the interest rates that are available right now in the mortgage market. I totally agree and would support the cause 100%, if not for 1 little thing: Most people that are buying right now are extending themselves to the same extent that got us in to this little housing mess in the first place! This blog is my soap box, so excuse my blatant opinion and bias considering the fact that my career is deeply entrenched in this topic, but I can't help myself in speaking up. I was reading the other day on www.cnnmoney (which I happen to respect and get a great deal of news from) and found an article about some first time home buyers that have stretched their budget to buy their first home. While I feel that home buying is a great investment (if I didn't I wouldn't own the amount of real estate that I do), it shouldn't be done without some seriously calculated risk and some seriously financially wise moves. For instance, home buyers don't take in to consideration the cost of repairing the big stuff in a home. If you have to replace a roof, the average cost in doing so is about $6000, and that's if your house is 1000-1500 square feet. Beyond that and you're looking at tacking on thousands of dollars. Or, lets consider a big plumbing issue like a sewer line failing and the replacement cost of digging it up and re-running a new line to the city sewer: a cost of about $5000. Those are major expenses that can put someone deeply in debt if they aren't prepared. These are the issues that I refer to when I talk about first time home buyers being ill-prepared.
With that being said, I don't want to scare away everyone that may be financially and intellectually capable and responsible for buying a home for themselves. This is a calculated move that should be done at some point in ones career/life. Building equity in a home is far more valuable that building a nest egg for your landlord (no bias here even though I am a landlord). Just make sure that when you're preparing for this major leap that you take the calculated risk and have the savings to ensure that no emergency is too far beyond your reach. Taking on a new debt load should not be your goal along with owning a new home. That just extends you further in your financial outcome and makes little sense in the long run.
Final message: The real estate market has never seen the lows that we're seeing right now in regards to present day values. There are bargains out there that are far more reaching than we can even imagine. With that being said, shop wisely and be financially astute. Don't be short sighted and use your better judgement when picking your next home. Take advantage of these low rates (low 5% range by the way) and the $8000 tax credit to get a home that fits you perfectly. Most importantly, find a house that can become your home. That's far more valuable than any financial gain that can be had.
Have a great rest of your week. Salud!