By Pam Pikkert
Red Deer Express
Around the end of May 2014, the market started to experience a declining trend in mortgage rates.
Though the housing market was already superb, professionals in the industry began gearing up for an influx in home buying.
Their predictions were correct and we’ve seen more and more houses of higher value being sold into the summer months.
When an area experiences a mortgage rate decline many renters make the hasty decision to purchase a dwelling before the rates jump up again. Though you could get a great deal you need to ask yourself if you’re truly ready for everything that home ownership entails.
Here are six key ways to decide if it’s the right time for you to buy.
1. You’re ready to commit. When looking to buy a home you need to consider your future. Do you see yourself living in the home for at least three to five years?
This is the minimum ownership time you need to consider as it takes three to five years to regain your buying and selling costs. If you were to sell before you’ve recovered those costs then you may lose money and could be liable to pay capital gains taxes.
Unless you’re sure that you can commit to a place for a few years then it’s better to continue renting until you’re more settled.
2. Budgeting is second-nature. Mortgage payments are bound to be your biggest monthly expense, but they aren’t the only payment you’ll be liable for when purchasing a home. You also need to factor in the insurance, property tax and condominium fees if you live in a shared building.
All of these expenses add up and you need to have solid budgeting skills to keep your finances in order so you know what you can afford. Always go into home buying with a budget so you don’t end up looking at homes out of your price-range.
3. Your finances are in order. Home ownership comes with an extremely high price tag and you need to be 100% sure you can afford it. Before buying a home, make sure you have a reliable job and income.
Your expenses will come due every month no matter what changes your situation may experience.
If you can’t pay them you could end up losing your investment and going into debt. Besides the income security, you also need to make sure you have little to no debt and good credit. These two aspects are the things a mortgage professional will look at first to make sure you’re financially stable and won’t have problems making payments.
4. You have savings. Homes don’t just have mortgages, they have down payments and hidden costs. You need to have a sizeable savings account to ensure you’re prepared for the initial and unexpected costs your investment will most certainly bring.
Having a large down payment helps get you a lower interest rate, therefore, saving you money in the end.
A large down payment typically means 20% of the home’s value. You also need to have an emergency savings fund for those unexpected costs such as repairs or in case you don’t have an income for a period of time if you get laid off.
5. Everything has been researched. Do you know what the past and current mortgage rate trends are? Have you looked into what they’re predicted to do in the future? Do you know what kind of home you want and what they’re currently selling for? These are all things you need to know before buying your first home, plus much more.
Make sure to do your research to ensure your investment is a sound one.
6. You’re prepared to be a landlord. Are you ready to take on the responsibility of a landlord? No longer will you be able to call up your manager to come unclog the toilet or fix appliances that have broken. All those tasks will fall on you and could be rather time consuming.
You also need to be prepared if you plan on renting out the home to tenants in the future. This will involve collecting money and being on-call if the renters need anything.
If you’ve said yes to everything on this list then you could begin seeing mortgage and real estate professionals to begin the home buying process!
If however, you weren’t confident in one or more area on this list then you need to take some time to resolve any barrier that may be in your way.
You could also make appointments with mortgage and real estate professionals to discuss what your options are and what you can do to prepare for home ownership. It’s always best to take a little extra time to make sure that your investment is something you actually want, at the right time and for a price you can afford. Happy house hunting!
Pam Pikkert is a mortgage broker with Dominion Lending Centres – Regional Mortgage Group in Red Deer.