How To Buy A New Home?
Certainly, the tips for buying your first home are better offered by those in the trade, albeit with a big element of selfish motive. Anybody connected with real estate or home loans would make you believe that you need to have a house of your own, because that’s his business and he is not doing anybody a favor. But, under the present scenario when the bubble is already burst, you are sure to meet any number of people who would acknowledge that buying a house isn’t always a wise proposition. In most part of the country, had you rented a house in 2006, when the market was booming, you would have got a big discount now! And, that brings us to point number one.
Compare to Rent
Isn’t it better to rent when buying costs substantially more than renting? For $ 750 a month, a two bedroom house in Tuscan, Arizona, was available for rent in 2006, whereas the cost including taxes, insurance, and normal maintenance along with mortgage payment worked out to $ 1,250 per month. That perhaps indicated that it was a speculative market. Had you bought a house that time, by this time you could have ended up spending above $24,000 more than had you rented it? There’s a difference of 30%
But it’s not just the price as interest rates keep fluctuating and that makes all the difference in deciding whether to buy or be on rent. Keeping the price of the house fixed, and interest rate of say 13%, (as it was in 1984) would almost double up the cost of the house were the interest rate 6%. Rentals too keep changing, but the variations are not so wide. So, it makes sense to rent and wait for interest rates to come down.
Right now, there are many places where it is cheaper to buy than to rent. Of course, part of the reason is a general or overall drop in prices, but you can’t overlook the fact that the interest rates are at their lowest now. You should work out the comparative data of buying versus renting in the town where you live now and find out what makes better sense.
Buy Less Than Recommended
Those in this business of selling houses or loans are biased, as they make more money by selling a bigger expensive house. Avoid the trap of buying a bigger house if you need to pay 35 -40 percent of your salary as housing debt. Jobs were never as undependable as of now and you may have to live without one anytime in the foreseeable future. It will be wise to restrict the amount of your loan payment, insurance and taxes to thirty percent of your income after taxes.
It is not difficult to understand the exception to above rule. Suppose your rent eats into 35 percent of your income and you are offered a house costing nearly the same, it will be worthwhile to buy one. At the same time, it may be worth considering moving to a different area that has lower rents and prices.
Consider All Costs
When buying a house, it’s quite normal for people to consider only the usually normal and expected costs, meaning that while comparing the price of two houses they take into account only the mortgage amount with taxes and insurance. But, there are other factors too that decide your personal expenses.
Just imagine if your house were farther away from your workplace, you would be incurring more expense towards gas and spending a lot more time in commuting to office and back. Another variable expense is due heating and normal maintenance, as each has its own features. So, you should take into account all such foreseeable factors that add your expense.