Owning a home is a dream and goal for most Hampton Roads residents. Of course, it’s no secret that buying a home is one of the biggest financial investments you will make in your lifetime. There is some good news about investing in a home, however - in 2014, the cost of homeownership, including mortgage, insurance, taxes and maintenance, is less than the cost of renting (say what?!).
One reason for the improved buying conditions is that the 30-year fixed interest rate for mortgages has been lower this year than last. The other is that renting costs are rising faster than home prices due to the strong demand. The market is looking up, but there are some personal factors you should evaluate to determine whether you’re at the tipping point and ready to buy.
When deciding whether to continue renting a home or to make the commitment to buy, meeting with a realtor can help you get started. To get a jump start, here are some points to consider:
You are committed to living in the same location for a few years.
When purchasing a home, the general rule is that you want to make sure you’ll be in the same location for at least five years. Owning a home requires a longer time to build equity.
You have a secure job and income.
The rule of thumb is that you can buy a house that costs about two and a half times your salary. Make sure you have a stable job. And if there’s a possibility that your job could move you out of the market, focus on buying in areas that will be easy to rent.
You have enough saved for a down payment.
For first time buyers, there are different types of home loans that will help you secure funding. Depending on your situation, you may qualify for an FHA, VA, Conventional or be able to pay with cash. Everyones lending will be different and remember to take potential big future changes into account when you calculate this - like whether you’ll get married, have kids or will need to replace your car soon.
Even if you do meet the three criteria above, it may be tough to determine when to start making moves in the direction of home ownership. Take the time to research the Hampton Roads market. Recent reports show that Hampton Roads’ home sales have rebounded. If prices are increasing in a neighborhood you love, you’ll want to buy soon. If they are slowly decreasing, consider the rate at which they are falling. If they’re falling slowly, and you’re ready to make the jump, it may not be worth waiting for a lower price.
Spring and summer are the busiest times of year for real estate and can be the best time to purchase your home. On the other hand, because there are so many houses on the market, there may be more competition. During the winter, sellers tend to be more flexible because the next homebuyer may not be around the corner. There are also fewer people looking for houses over the holidays, which could be perfect timing with less competition to snag a dream home in Hampton Roads.
Once you have decided you’re ready, here are the first steps to take:
Get pre-approved. Few people have enough cash to buy a home without a mortgage. A mortgage broker will look at several loan companies to find the best rates. If you’re not sure where to begin, it’s likely that your realtor will have a recommendation. I personally have a great relationship with an awesome loan officer at Monarch Mortgage that can help you determine what you qualify for before we head out on the house hunt!
Research loan types and payment options. Usually a fixed rate is the best option. Your interest remains the same for the life of the loan and the payment is split into equal monthly payment for the duration of the loan.
Your realtor (cough, cough) is the best person to guide you through this process, so be sure to share your goals – more on that in my next post!
What questions do you have? If you’ve bought a home before, what tips would you add for new homebuyers?