Real Estate
September 20, 2017
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Thinking about buying a house?

By: Scott Sheldon
September 8, 2017

Most US housing markets are supporting little inventory and big demand creating a favorable environment for sellers. If you’re thinking about buying a house and you’re worried you’re buying at the top of the market look at the bigger picture…

If we were to rewind the clock to 2012 everyone was petrified about purchasing a home because they were worried about catching a falling knife. People were worried about their jobs, unemployment was high and economic growth was stagnating. Fast forward to 2017, unemployment is extremely low, consumer optimism is very strong and people are feeling confident about their income stability creating a seller’s market.

Think a ten-year plan. If you’re thinking about buying a home and you have a long-term hold strategy in place the risk for you is extremely small especially if you’re on an affordable fixed rate mortgage loan. Optimally, that means a mortgage payment that’s three times less than what your monthly income is. 

If you are buying a home, but have another property to sell first, remember you’re selling in the same environment in which you’re buying so you are working with equivalent dollars. A critical component, people typically focus on much more so than they should, is the sale price of the home. 

Granted, the price of the home is very important but what should be more important to you as a homebuyer at the end of the day is your mortgage payment. You need to be comfortable with that mortgage payment through thick and thin. When we say mortgage payment we are talking about principal, interest, taxes and insurance and any applicable private mortgage insurance that is due.

Every buyer is on a different path. Some homebuyers are downsizing and are trading down, others are trading up and others are purchasing a house for the first time. Take the person for example who is purchasing a house for the first time. They can purchase a primary home within their means, something that is affordable where they can create a financial steppingstone. By staying in that property say seven to ten years and then trade up to the midsize home or the longer-term home when their equity and/or incomes allow. That is a pragmatic safe approach and one that many people take over the greater picture.

The markets will change no matter what happens to you financially. Life events, job changes, job promotion, marriage, divorce, kids and some things happen and support a potential home buying situation. All those things happen regardless of what the market does. Think long term on a fixed rate mortgage and your chances of buying a home and coming out financially strong not to mention huge tax savings are extremely favorable.

 

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.