It’s in the news everyday, the mortgage crisis, house prices falling, credit tightening. Is can’t be a good time to buy a house, can it?Actually, it may be just the right time to buy depending on your location. The news media has gotten everyone worried with their constant drone of negative news. Bad news sells, it’s a simple fact. However, the facts about house buying aren’t so simple.
Location, Location, Location
The old real estate saying is in full force. The decision to buy or not to buy is going to depend a lot on your location. The thing is that the housing and mortgage problems, while widespread in the United States, don’t affect everywhere in the country or even everywhere in a particular metropolitan area.
It is true that it probably isn’t the best time to buy in areas where house prices were driven by excessive speculation, such as in some areas of California, Florida and parts of some other metro areas. These areas will probably remain less than desirable for some time as the prices come down and foreclosures on questionable loans create ghost town sub-divisions.
However, there are other areas where prices are reasonable because they’ve been relatively untouched by speculation. These will often be in more rural areas or on the less popular suburban or further out exurban areas of sprawling cities like Atlanta (where I live), Dallas/Fort Worth and others. Deals can be had simply because the negative news is driving away buyers.
Builders in these unaffected areas are offering great incentives for buyers of new homes, particularly to first time buyers or others who don’t currently own a home. Bonus deals of $25,000 or more are common. These incentives can be used to buy down loans, purchase extras or just about anything short of an actual cash kickback.
Existing home deals are a bit tougher since they depend a lot on how motivated the seller is. In some cases, they would rather the property sit empty than selling it for a low price. Others, however, are willing to deal. Strong negotiating may win the day and there are always more houses to consider right now.
About Those Loans
If you have good credit, meaning an average credit score over about 680, and little debt you can get a conventional 15 or 30 year loan rather easily, even a 3% down or a 100% financing loan. The loans that are designed to get you into more house than you can afford, like adjustable rate mortgages, aren’t so easy to get now but you really don’t want one of those anyway.
My recommendation on what you can afford is no more than about 30% of your NET, take home, income, not your gross. Too many people buy without a buffer. Using your actual take home pay as the basis gives you a valuable buffer against tough times. Avoid taking on more loan than you can really afford and you’ll avoid trouble down the road.
The reason I’m talking about this is that I’m in the process of buying a new home right now. I thought it would be a lot more trouble than it’s been so far, particularly from the loan perspective, but it’s been quite easy. I’ll be reporting on how it goes in the future.
Are you in the market for a house? Are you having mortgage problems? What’s you’re take on this situation? If you don’t live in the US, what is home buying like in your country?