Rules to follow when buying a new home
Jennifer McClelland | RSS | 7 Comments
After the housing market collapsed, followed by the credit crunch, it became quite difficult for people to buy homes. However, now, while still tight, it is becoming easier (than a few months ago) to find a mortgage. So how do you know what to get and what will you be happy in?
Here are some tips from the New York Times:
1) Start with the basics. Put 20% down on your home, get a fixed rate mortgage, and make sure that your mortgage is no more than 35% of your pretax income.
2) Consider your income. Being overconfident in your income will only get you in trouble when it comes to buying a home. You need to make sure that you’re still able to save money every month in addition to paying the mortgage.
3) Bow to the Unknowns. There may come a time when you decide to have children or change your career. If or when this happens, you need to make sure that you’re not caught up in a mortgage that keeps you from doing what is truly rewarding to you.
4) The 8 Hour Rule. If you can’t sleep through the night because you’re worried about how much you’re going to pay for the mortgage or worried about how to pay for the mortgage you shouldn’t be getting the house. If you have to take sleeping pills to help yourself get to bed at night, then perhaps it’s time to rethink the entire home purchase.
There are three more rules along with much more detail about each tip at the article source at the bottom of the post.
I think that there are a lot of things to consider when buying a home; all of these tips are great. Mortgages are not something that should be entered into lightly and should really be thought about because when you’re unable to pay your mortgage then you’re going to have credit problems for a long time and you will also find yourself in a lot of heartache about what was supposed to be your “dream”.
The Pitch – Are you worried by the drop in average home price?
What does it really cost to own a home?
The Pitch – Are buying agents necessary?
Tags: buying a home, Money, credit crunch
xochitl from belfast hotels | Sun, Sep 20 2009
The points raised in the New York times are all down to good common sense. Unfortunately when making purchases, especially of our “dream home”, common sense is not always a major factor in the equation.
In addition managing to build up that recommended 20% deposit is very difficult in the current economic climate.Maybe it is time for a seed change in our attitudes to home ownership.
David | Sun, Sep 20 2009
Very relevant list and one that UK bankers seemed to forget before the credit crunch. If you look here in the UK at the situation at height of credit boom
1/ Banks like Northern Rock were not only not asking for a deposit they were offering 120% mortgages.
2/ Self certs mortgages led to 100,000’s of people lying about what they were really earning and the bankers did not care.
3/ Very true but a concept people seemed to forget as they chased property profits.
4/ Probably the most sensible point of the lot as today here in the UK and i guess in States to 1000’s are having sleepless nights everyday as they try to fight of repossesion and eviction which could have been avoided by following this point.
Chris McClelland | Tue, Sep 22 2009
I have heard of the 100% loan but never of the 120% loan, that type of loan simply implies that they are hoping for a high default rate. If people default the bank made a few months interest(and keeps your principal), and with the bet that housing prices will continue to go up, it’s a really profitable position.
Of coarse if you’re wrong then you’re really are paying a high premium for growth. Kinda like paying the difference of a bank doing a 80% loan would be a person paying 0.80 P/E for $1.00 in assets, vs a bank making a 120% loan for $1 in assets. One loaner may make fewer loans but at least won’t be caught up a creek without a paddle.
Unfortunately, in this case many of the bank made the wrong bet.
Steven from Kangaroo Self Storage | Mon, Oct 05 2009
Good additional points David. People thought the party would never end and that prices would just keep rising. 120% mortgages were unbelieveable and totally irresponsible. Let’s wait 10-15 years and it’ll happen again.
ANSH from Roseville real estate for sale | Fri, Oct 30 2009
There should be some rules before you get a home, I think if everybody where to follow those rules then no one would be in a mess.
Craig | Tue, Dec 08 2009
I agree with Steven that although currently banks have tightened up their lending criteria in 10-15 years they will have been forgotten and no doubt the bad old days will return. These tips though should certainly be read by anyone looking to enter the property market and especially first time buyers.
Jack from One Sutton Place South | Tue, Dec 15 2009
We have grown so accustomed to getting what we want when we want it – and fast. You don’t need your dream home now –
N Eldon Tanner, a church leader, said it best:
“Those who structure their standard of living to allow a little surplus control their circumstances. Those who spend a little more than they earn are controlled by their circumstances. They are in bondage.”