When to Buy a Home and Secure a Mortgage

For those potential home owners that are wavering between buying and renting, there is more than the pride of ownership to consider.  Buying a home comes with additional costs over that of renting, but it also has many more perks than renting.  If you’re beginning to itch to buy your own home, be sure you’re truly ready.  Start by doing your homework on the housing market as well as mortgage programs and mortgage rates. 

This preliminary research should include extensive use of the various mortgage calculators to analyze mortgage rates, loan costs and monthly mortgage payments.  Once a prospective home buyer is confident in their ability to handle the mortgage payments the mortgage calculators can be employed to evaluate home loan qualifications based on what the lenders are looking for.  This information can be used to review your finances including assets, income and debts before going forward with the house hunt.

Review the Down Payment Requirements

The first step to decide if you can buy a home is not the monthly costs.  It is the initial costs of a home.  If you can afford a true down payment on a home including closing costs and possible points, it most likely makes sense for you to buy.  Home owners get serious tax breaks, but that tax break will be lost if you’re paying a penalty for not having an adequate down payment or are struggling with a sub prime mortgage that is too much for your income to bear.  In recent years, we have certainly see the results of too many homeowners not have sufficient funds to handle a new home end up subsequently losing that home to foreclosure or delinquent on their monthly mortgage payments

Saving at least five percent of the home’s value before purchasing is becoming the minimum standard to secure financing.  A larger down payment provides more security and more financing options.  In addition to having immediate home equity, you’ll also find that your financing options are much more attractive without trying to find mortgage loans which require less money down, higher interest rates and hefty private mortgage insurance payments.  The exception would be FHA mortgage loans and loans for qualified veterans, which are subsidized by the government.  Take advantage of the mortgage calculators to determine the amount of down payment needed and how the monthly mortgage payments can change with different down payment amounts.

You Have the Time

Buying and owning a home involves more than just the financing and the monthly mortgage payments.  Another major consideration for home ownership includes the time to deal with the upkeep of that house itself.  Home ownership requires periodic maintenance such as yard work, exterior physical maintenance and repairs of components that wear out over time.  When will you mow the yard and repair any little problems that arise?  Renting makes these little tasks other people’s problems.  You can hire a cleaning or lawn service, but you still must be around enough to facilitate any workers in or around your home.

You’re Staying Put

If you move constantly or have a career that takes you far from home on a regular basis, you may be better off renting a while longer.  Owning a home means putting down roots in a particular community.  You’ll be paying for the upkeep of the neighborhood as well as school taxes.  Your children will be friends with other kids nearby and you may enjoy getting to know your neighbors at backyard grills or such.

If you’re constantly moving around the country or even the globe, owning a home may be a commitment you’re not willing to endure.  In order to obtain the possibility of real appreciation, time can be a key element.  Time also increases equity through the reduction in the principal of the home loan.  The mortgage amortization calculator can come in handy to measure the principal reduction over time and the subsequent increase in equity.  As a new homeowner you will be responsible for the home’s upkeep even while traveling and selling a home after a short-term will likely cost you far more than you’ve made in equity.

You Can Afford It Long-term

A home is an excellent investment, but the bulk of homes are an investment that should be considered over the long-term.  Despite television shows to the contrary, flipping a home or selling it after a few well chosen modifications, is often not a lucrative option in the majority of housing markets.  Invest your money first in appropriate investment securities and other savings alternatives before jumping into home ownership without knowing all the costs, options and time involved.

With liquid investments such as stocks, binds and bank certificates of deposits you are able to access your money quickly in case of emergency.  By tying up all of your money in your home, you will have to take out a loan or sell your home, which can take months, to access funds should a financial crisis arise.

You must also consider your income in the long-term.  If you’re stretching to meet your mortgage payments every month, but know that you’ll need a new car in a year or less, buying a home may not be a wise use of your money.  Either invest in a smaller, more affordable home, or continue renting until your income rises to the level you need to afford the sort of home you’d prefer.  Study your needs and financial resources first.  Compare the costs of renting versus home ownership.  Study the available mortgage rates and mortgage options.  Use all available resources including the mortgage calculators and then choose to purchase a new home with sound research and confidence in the decision.

Tags: amortization calculator, down payment, FHA mortgage, homeownership, mortgage, mortgage calculators, mortgage payments, mortgage rates, private mortgage insurance

This entry was posted on Tuesday, May 5th, 2009 at 2:15 pm and is filed under Mortgage Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.