 Are you trying to decide whether NOW is the right time to buy a new home? There are some basic questions you can ask yourself first and then we can meet to discuss in detail whether now is the right time. If it isn't that is okay, you won't find any pressure to make you buy. It's not my style.
How long do you plan to live in the home?
If you purchase a home and get a job transfer or decide to move after only a short time, you may end up paying money in order to sell it. The value of your home may not have appreciated enough to cover the costs that you paid to buy the home and the costs that it would take you to sell your home. The length of time that it will take to cover those costs depends on various economic factors in the area of the home. In the DC area, the current market is projecting an average of 3- 5% appreciation per year. In this case, you should plan to stay in your home at least 3-4 years to cover buying and selling costs.
How long will the home will meet your needs?
What features do you require in a home to satisfy your lifestyle now? Three years from now? Five years from now? Depending on how long you plan to stay in your home, you'll need to ensure that the home has the amenities that you'll need. For example, a one bedroom condo may be perfect for a single person or a young couple with no children. However, if you start a family, you could outgrow the space. Therefore, you should consider a home with room to grow. Could the basement be turned into a den and extra bedrooms? Could the attic be turned into a master suite? Having an idea of what you'll need will help you find a home that will satisfy you for years to come.
Your financial health - your credit and home affordability.
Is now the right time financially for you to buy a home? Would you rate your financial picture as healthy? Is your credit good? While you can always find a lender to lend you money, solid lenders are more skeptical if your credit history is not good. Generally, a couple of blemishes on a credit report will make you a good credit risk and could qualify you for the lowest interest rates. If you have more than a couple of blemishes on your report, lenders may still provide you with a loan, but you may just have to pay a higher interest rate and fees.
Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment tomorrow. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it's within your comfort zone.
Where the money for the transaction will come from?
Typically homebuyers will need some money for a down payment and closing costs. However, with today's broad range of loan options, having a lot of money saved for a down payment is not always necessary - if you can prove that you are a good financial risk to a lender. If your credit isn't stellar but you have managed to save 10-20% for a down payment, you will still appear to be a very good financial risk to a lender.
Know the ongoing costs of home ownership.
Maintenance, improvements, taxes and insurance are all costs that are added to a monthly house payment. If you buy a condominium, townhouse or in certain communities, a monthly homeowner's association fee might be required. If these additional costs are a concern, you can make choices to lower or avoid these fees. If you are still unsure if you should buy a home after making these considerations, you may want to consult with an accountant or financial planner to help you assess how a home purchase fits into your overall financial goals.
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