One of the challenges people have when deciding to purchase a house is trying to pinpoint the right time to make the move. Everyone is in a different stage of life and pinpointing the optimal time can be a little bit tricky depending on one’s personal finances. Here are some things to consider when deciding to buy a home…
Let’s presume for a second that your cash, credit, and income are sufficient, and you do qualify for home financing. You’re feeling good about your job, you’re not moving away anytime soon, you’re otherwise financially grounded. But how do you determine when the best time to purchase a house is? With the pandemic and everything going on, there’s a concern “Gosh I might purchase a house and I could catch a falling knife”.
Nobody wants to catch a falling knife obviously however pinpointing the best time to purchase a house can be a little bit difficult. If you’re going to buy a primary home, you’re going to live in the home for 5- 7 years or longer, and no matter what the payment is affordable, you can still save money on a monthly basis, as long as those elements are all in place, absolutely move forward. You will gain a big tax deduction and more importantly, you’ll have a place for you and your family to live in and enjoy for many years to come. The key is to structure it so you are not married to your mortgage payment.
So let’s play devil’s advocate for a second. Let’s say that you’re trying to time the market and you don’t want to buy a house right now because you think housing prices are going to drop. Okay, that’s a fair argument so let’s quantify that. Let’s say a $550,000 house today is a $500,000 house in 6-8 months from now, again playing worst-case scenario right?
So $50,000 of borrowing power is what the differentiator is between buying a house now versus buying a house in the future. Let the mathematics be your guide. $50,000 of spending power on most mortgage loan programs and down payment options available translates to about $325 a month of payment. $325 a month of payment can be absorbed by paying off a car loan, a student loan, or a credit card for example.
In other words, you can offset the $325 a month of payment by paying off consumer debt. Independent of paying off consumer debt $325 a month of payment is a considerable amount of money on a monthly budget. If a $325 a month payment is going to push you over the edge financially to a spot where you’re not comfortable, you might want to think about purchasing the house.
Remember this is all based on the fact that you have sufficient income a solid budget and you can save money. If $325 a month of payment is going to be more painful than the loss of all of your subsequent future happy memories, celebrations and family experiences that you’re going to inevitably gain by buying that house then don’t do it.
Put everything into a quantifiable mathematical picture, let the math be your determination for whether you start actively looking at houses and making offers on the house now or if you decide to explore it down the line. Another risk to consider is potentially paying a higher cost of funds (higher rates) for money down the line as mortgage rates presently are at historical lows.
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