It seems like the perfect time to buy a house. The economy is on an upturn (slow, but still moving upward), the housing market is turning around and low interest rates are making buying a house a more attractive option.
Is this the right time to buy? Here are a few considerations before you sign on the dotted line.
- Find the right loan. Is this your first home? You might qualify for a FHA (Federal Housing Administration) loan. FHA loans have helped families get into homes since 1934. It allows for a smaller interest rate which will save you thousands in the long run. But the biggest perk with a FHA loan is that the down payment can be as little as 3.5% of the purchased price of the home. That means instead of a $30,000 down payment, a family can get into a home with a $7,000 down payment.
- Buy or build. This is becoming a bigger consideration as potential homeowners are becoming less interested with the aging homes in more established cities. In my housing market, it is about the same price to build a house than to buy an average home built in the 1980s. Building a home comes will a whole new set of headaches- floor plans, landscaping, etc.
- Short sales. While the economy is on a somewhat upturn, there is still one troubling sign: short sales flooding the market. Short sales are when the homeowner sells the home for less than they owe. This requires a third party to get involved which complicates the process. Often times the third party is the bank. Some banks want to move the house quickly and will expedite the process, while other banks want to weigh out the options and receive as many offers as possible. This can make the buying process very long. With a lot of extra red tape. While this may seem like a big turn off, you can score some great deals with a short sale.
- Figure out what is important to you in a home. Because you will definitely pay for it. If you have enough money, you truly can have it all: the big backyard, the fancy house with all of the details. But for those who don’t have a ton in the bank, you have to make choices. Big back yard? Home theater? Decide what is important to you and know what the costs are with it.
- Real estate agent or not. Many potential home buyers search for homes on their own, but others utilize a real estate agent to do the leg work. A real estate agent will find homes that are for sale with your desired price, locations, schools, etc. Instead of digging though pages and pages of listings that aren’t what you want, a real estate agent can narrow your search. The agent also has experience negotiating deals and can handle the cumbersome paperwork during the home buying transaction. The real estate agent gets a percentage of the sale, usually paid for by the home seller but that can be negotiated.