For many years I taught first time homebuyers classes for Dakota County CDA. The classes were part of the Homestretch Program through Minnesota Housing. One of the first sections we talked about was whether the time was right to buy a home. It is a decision that each potential homebuyer needs to make. The best way to decide if the time is right is to ask yourself several questions.
As a lender, I like to ask what buyers are comfortable with for house payments. I also want to know what they have been paying for their rent or mortgage payment. You don't want to be house poor. You want to be able to go out and have money for emergencies. If you have been making a $500 rent payment and have not been saving money, it will be difficult to make a $1200 house payment. There are people that tell me they can do that – maybe they can, but it may change how they have been living.
If someone is looking to increase their current payment, I suggest that they start making the higher payment now. Pay the current rent payment, but put the difference into a savings account so that you can get used to making the higher payment. The bonus to doing this is that you will also build up a cushion in a savings account that can be used for your down payment or maybe just for new things for your new home!
I would ask the people that attended the class to tell me why they wanted to buy a home. Most of the reasons fell into a couple of categories – owning property, tax benefits, being able to do what they wanted to with their home. Others weren't sure if they wanted to buy and wanted to know what they could afford and if it was right for them. Some people simply wanted to be able to plant a garden or paint the walls in their home. Owning a home isn't right for everyone, but if you have a stable income, you know you will be in the area for awhile and you have some money for a down payment, it is a great time to buy.
If you aren't sure about buying a home, talk with a real estate agent or a lender and find out if it makes sense for you. This year is a terrific time with lower sales prices, lower interest rates and the potential of a $8000 tax credit for first time homebuyers.
Leslie Vanderwerf, Advisors Mortgage - lvanderwerf@advisorsmtg.com – Website
