There’s never been a better time to buy a new home.
Well, there was, actually. Maybe three years ago, when rates were as low or lower than they are today, and prices had yet to inflate.
It’s the second best time to buy a new home. You have fixed interest rates under 6.5% and condo prices stagnant, within the city.
If you plan on owning your home for three years or longer (don’t we all?) then I think you should feel confident that buying today will be a good investment (by investment, I mean, you won’t lose your shirt).
Anyway, here are some tips:
* First, carefully evaluate your financing options before you start shopping for homes.
One-hundred-percent financing and interest-only mortgages have become popular in recent years, particularly with first-time buyers. With both of these types of financing, you don’t build equity in your home when prices are flat unless you make improvements that increase the property’s value or you pay down the principal balance. So, if you were to sell after years of zero or less appreciation, you could end up paying out of pocket to close the sale.
This doesn’t mean that you shouldn’t use this type of financing.
Yes, actually, it does mean don’t use this type of financing. Are you nuts? Put down 5 or 10 percent, when you buy. If you can’t afford to do this, and you’re a first-time homebuyer, move in with your parents or to a cheaper location, and rent. On the other hand, if you’re a repeat buyer, and have 5 or 10 percent equity from your current home, maybe it makes sense to invest your money in something else, and borrow 100% for your new home, if the interest rate on your new loan is lower than what you’ll get on the money you’re thinking of investing.
* The next step is to learn as much as possible about local market values. This means looking at a lot of property until you understand why one listing sold for $20,000 or $50,000 more than another.
I think this is important. I brought this up with a client, this weekend, in fact. If you’re buying in a neighborhood you aren’t familiar with, you don’t want to just see properties that fit all your criteria, or just the couple of homes you think you’ll want to buy. You’ll want to see as many homes as necessary to make you comfortable you know why homes cost what they do. This can be accomplished in a short period of time – say, by going to open houses on one or two Sundays. See 15 properties, to get a good base of knowledge. Then, you’ll feel comfortable making an offer on the place you really like. Otherwise, you’ll always wonder, did I overpay?
To be a successful home buyer in any market, you need an agent who has intimate knowledge of the local area, is a good communicator and is skilled at negotiation. In a hot market where home prices are escalating, you want an agent who can counsel you on how to win in a multiple offer situation.
I couldn’t have put it better, myself.
Source: Preparing to buy in 2007 – By Dian Hymer, Inman News, by way of The Boston Globe
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