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Why Procrastinating on the Purchase of a Home Could Hurt You

Buying a home is a process that takes much time and foreplanning. It is not typically a process that happens in the snap of a finger. If you have been considering purchasing a home, now is the right time to make that dream become a reality. It is time to get the ball rolling and stop delaying the process. Here are two reasons why procrastinating buying a home could hurt you:

 

  1. Home prices are going to rise.
  2. Interest rates are going to rise.

 

Forbes made 11 predictions on what the housing market was going to look like in the year of 2015. Two of those predictions included home prices and interest rates rising. The prediction of a rise of home prices was based on predictions made by Zillow and Realtor.com. Both of these companies expect prices to rise around 2-5% over the year. Then, the prediction of an increased interest rate was based upon studies done by both the Mortgage Banker’s Association and Freddie Mac. They predicted interest rates to rise between 4-5% throughout the year. Thus far in 2015, these predictions have proved to be true.

 

How does this affect those looking to purchase a home?

With home prices and interest rates predicted to rise, the affordability of homes is decreasing. The best time to purchase a home is now, while these costs are still low. The longer a person waits, the less affordable becoming a homeowner is going to be. Unfortunately, it is commonly known that even at the rates currently available, becoming a homeowner is not an easy task. And by waiting, the task is just going to become more difficult.

 

Who does this most affect?

People who want to buy a home in a small metropolitan city in the U.S. are going to most benefit from purchasing a home right now. Those who are currently living and renting their homes in these areas are going to be able to save more money through purchasing a home now than they will through continuing to rent a home. This is especially true in California. In a study done by realtor.com on 382 different markets, the area most likely to benefit from purchasing a home instead of renting in the next 30 years was Santa Cruz. If a person in Santa Cruz were to buy a three-bedroom home right now, based on predictions of costs, interest, and appreciation, the buyer is going to save over $65,000.

In addition, Realtor.com provided statistics demonstrating the projected savings of people who switched from renting to purchasing a home in the largest metropolitan cities. San Francisco was predicted to have the most savings, reaching close to $300,000 over a 30-year span. The first five cities on the list were: San Francisco, Seattle, Boston, Tampa, and New York City. Los Angeles was 11th on the list, with a predicted savings of around $150,000 over a 30-year period. Not all cities are going to provide a substantial amount of savings. Dallas had the least amount of savings over 30 years, reaching only $800. But for the majority of cities across the U.S., the savings are greater.

 

What are the difficulties?

Though the time to purchase a home may clearly be now, it does not mean that purchasing a home is easy right now. The biggest reason people are unable to purchase a home is the amount of money needed to make a down payment. There are many young individuals out there hoping and looking to purchase a home, but come up short when it comes to the finances needed to purchase a home. And unfortunately, time is not in a homebuyer’s favor. The longer a person waits to purchase a home, the more money a person is going to need, and the less likely that person is going to be able to afford a home.

 

What can a person do to increase their ability to afford a home?

First, a prospective homeowner needs to concentrate on having a good credit score. To do this, it is important that you consistently make your payments on time and pay off your debt as quickly as possible. Missed payments and high debt are going to make it harder for you to be approved by a lender and receive the lowest interest rate possible. You will also want to check your credit report before even beginning the process of purchasing a home. If there are any mistakes on your report, you will want them to be corrected before the process begins.

Second, a prospective homeowner needs to have a sufficient amount of funds to be able to make a down payment. This is the hardest task for current renters who want to become homeowners. If you cannot currently afford the typical 20% down payment, there are other options.
You can pay less than the 20%, but pay for private mortgage insurance. Though this will be more costly over time, it enables you to at least purchase the home.

  • There are companies that enable you to take out a secondary loan, which is used to cover the amount of the down payment you were unable to afford.
  • You can look for a program that will help you purchase a home. In California, the California Housing Finance Agency provides assistance in financing homes.
  • Have your friends and family help. A loan from your family, if done correctly, could be what enables you to purchase a home.

Third, a prospective homeowner needs to select a home he or she is actually able to afford. In a market where housing is difficult to afford, it is important that the options you consider are actually options that fit within your budget. Talk to a realtor about your finances and the homes available in that range. Make sure to be very open, a realtor is not going to be able to make the right recommendations if they do not know all of the details.

By completing these steps, a prospective homeowner is going to help himself or herself be able to afford a home. If you are currently renting a home, consider doing the math yourself to determine whether or not you would save by purchasing a home. If the math seems to indicate that you will save, start preparing yourself to be a homebuyer. Unfortunately, the preparation for becoming a homeowner can take an extended amount of time. The earlier you start, the sooner you are going to be able to have a home and save money.

Contact Paul Chunyk

Reach out to me, I would love to give you more details and get you headed in the right direction to accomplish your goals.

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