How To Decide To Buy Or Not To Buy

By Kaci Cooper, 23 Jan 19:26

With the recent incident of the stock market going down, the realty market in most places has become a buyer’s market, not a seller’s market.

This makes many Americans ask the question of whether they should buy or sell their home, or if they are determined to move, whether renting becomes a more viable option. In the past few years, the realty market has varied greatly on the region one is in.

For example, the market in Florida has been on a steady decline, while the California market has been steadily rising. In Las Vegas, Nevada, the market has been increasing, up until recent months when flexible interest rates have pushed the market to the point of collapse. So when buying or selling a home, one must be wary of the present state of the realty market.

The realty market is fragile. This being the case one should not put their house on the market unless they need to sell. The idea of testing the water can really hurt the market. In fact, if the main reason a person wants to move is simply to downsize or add a couple of rooms, it might be best to rent a home and then buy a house.

If you plan to buy a home, make sure you intend to stay in your home for a long time, that you are stable financially, and can qualify. If these things describe you, the obvious choice is to buy. Also, do not try and manipulate the market in an attempt to make some quick cash. The market does not work this way. In fact it is unlikely that you can regain even the minimal price you paid, unless you remain in the house for at least five years, more than that if you want to make a profit.

Do research. For instance, check out an article in “Smart Money” magazine that has a detailed worksheet which compares the pros and cons of renting versus buying given the current market conditions, as well as the time period you need to remain in your house in order to make a profit.
An example of this in action is if you were to buy a house in Boulder, Colorado for $400,000. You take the estimate that the market will go down from 11% to 9%, then you assume you will inhabit the house for three years, you would get back $88,750 in equity, but if you stayed for five years you would gain $120,360.

So be careful, make sure you check out the market before you make your final decision and plan to stay put for a few years when determining whether you should buy, sell, or rent your house. But also keep in mind whether you can afford to pay a mortgage.

Several life experiences can affect your ability to afford a mortgage. These things are important and you need to pay attention to them, in order to avoid going bankrupt. The top three reasons people file for bankruptcy are: change of occupation, divorce, and unforeseen health problems. Take care to create a financial plan to avoid going bankrupt in facing these problems. Life events control your ability to buy now or force you to wait to buy until a more financially convenient time. If you find yourself in the following situations, it may be in your best interest to put off buying and perhaps rent instead, at least for the time being:

-Do you plan to move sooner that two years from now?
-Are you intending to make a job switch?
-Are you planning to have kids within the next year?
-Have you recently, or ever, filed for bankruptcy and/or is your credit score below 630?

Answering yes to these questions determines that right now is not the best time for you to buy. Take note that if you are planning to get married soon, have just broken up with your significant other, or have serious health problems, you should also probably consider waiting for a better time. However, many factors affect your ability to qualify for a mortgage. It is always advisable to talk to a Certified Mortgage Planning Specialist to figure out the best route for you given your personal situation.

In addition to these personal factors, pay close attention to where you stand financially. If you are buying more than you can pay off right now and putting yourself into debt, without a foreseeable income increase, then you might want to slow down. Taking on a mortgage on top of debt, even with a low-or no down payment, is dangerous and can lead to bankruptcy. The best thing you can do for yourself financially is to not allow yourself to fall into debt at all. Studies show that most people taking on loans to recover from debt pay higher interest rates than those with good credit.

The question of whether put yourself together financially and pay a higher price for a home due to the increasing realty rates or to pay for an expensive loan and buy at a low price is difficult to answer, which is why it is advised that you discuss your situation with a financial advisor.
However, if you believe that you can buy a home and fix it up over time to help it appreciate more quickly, then you can try to take on a renter to help pay for your mortgage.
If you have the money and believe that your life is going to remain stable, then you still need to consider interest rates and the affect buying a home will have on your taxes. Make sure you know whether the interest rates are rising quickly, at which point you will need to get in the game before they rise too far or if they have already peaked, recognize how they will affect your budget.

Stay patient, your waiting will pay off if you do the following to protect yourself.
1. Go to open houses. This will allow you to see understand the protocol and speak with local professionals.
2. Find a trustworthy agent to lead you to a stable mortgage broke who will help you get pre-approved.
3. Find out if you need to repair your credit before you can get started.
If you follow these steps you are on your way to buying a home.

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