One of the biggest challenges is trying to pinpoint the right time to buy a home. Interest rates are in flux and housing prices are high in most markets. So, how do you decide when to pull the trigger for the big-ticket purchase?
The first is to focus on the things that you can control. Your income is the biggest driver of your ability to do anything. It’s also the biggest driver of wealth creation for you and your family. Without a proper level of income, affording a mortgage payment becomes almost impossible. Next, we want to look at debt like car loans or credit cards for example. These things can inhibit your ability to borrow making the emphasis on income even more important. Paying these things down or paying them off in full is a great step in propelling you in the right direction for success. The last element here is keeping a good credit score.
Granted you can still get a mortgage loan today with a credit score even as low as five hundred. Putting off buying a home because your credit score is 20 or 30 points away from where you think it should be, isn’t the smartest approach. Lastly, down payment. Yes, there are programs out there that allow you to buy a home with little or no down payment. In most markets, those types of loans are not bridging the gap between helping people go from renting a home to buying a home. Those programs have higher interest rates and higher monthly payments which you guessed puts more emphasis on income. Having a down payment, which means having anywhere from as little as 3%-3.5% to buy a home is key. That might mean having to work up the courage to ask mom, dad, or a family member for help with the down payment. It also may mean having to tap your 401K. This allows you to buy a home by borrowing on it for a primary home in the form of a pretax loan which doesn’t hurt the monthly budget as you may think it would.
A fixed-rate mortgage on a 30-year loan without a prepayment penalty is your best friend in bridging the gap from where you are to where you’re going. Trying to time the market is akin to trying to find a needle in a haystack it’s impossible. All you can do is decide based on what you know today to make the best decision for you and your family with the resources and the information you have. No one knows what the market is going to do. If you were to buy a house in this year 2022, and you did scoop up an interest rate in the high fives or the low sixes –know this the market will correct. There will be future opportunities to refinance that loan improving your borrowing power and giving you the ability to save money in the future. The best thing you can do is talk to a lender who understands the financial markets, understands how your finances relate to the price point you’re looking at, and can best advise you on the best strategy for you and your family’s real estate endeavors.
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