Last Wednesday, the Mortgage Bankers Association (MBA) reported a 2.1% increase in mortgage applications compared to the previous week. Although purchase applications have been going up in the past few weeks, this was the second consecutive week that refinances increased despite the fact that mortgage rates started to rise slightly two weeks ago. You may be wondering whether it is time to start filling up your mortgage application forms and scouting for houses before the mortgage interest rates start to climb again, which is expected when the economy starts improving.
1. Could You Buy a Home?
The first issue that you should tackle if you’re thinking of purchasing a home is whether you are financially capable of buying a home right now. This question can easily be answered if you are one of the financially savvy ones who can buy a property on a cash basis; however, you need to consider various factors if you have to rely on credit in order to acquire a property. Do you have enough cash for down payment? Is your credit score high enough to qualify you for a mortgage? Do you have a source of income, and enough amount of income, that can convince mortgagors to lend you money for your purchase?
This first question is the most overwhelming and yet the most important of all. If numbers are not your specialty, many resources are available online to help you in your decision process. There are online calculators that can help you determine how much house you can afford, estimate how much your monthly payments will be and even help you decide whether you should just rent or buy your own house.
2. Should You Buy a Home?
Just because you are financially ready to buy a house does not mean that you should take the plunge. Ask yourself what kind of house do you want and why do you want it. Some people buy houses because other people convinced them that homeownership is better than renting. While this can be a good advice because homeownership creates equity as you pay off your mortgage, you don’t want to be burdened by becoming an out-of-state landlord or with selling your property sooner than expected because of job relocation. Consider your lifestyle and financial goals; just because you can doesn’t mean you should.
3. Can You Keep Your Home?
Your mortgage payments are not the only financial expenses that you should worry about as a homeowner. Now, you will be the one to take care of every leak, water heater problem, air-conditioner breakdown and all the other repair and maintenance expenses that one usually doesn’t worry about when he is just renting a house. If you are unlucky, you might even need to fix sewer problems like what happened in our Las Vegas property where we needed to pay for repairs not only within our property but also up to the main sewer line of the city. Yes, this included digging up the street and sidewalk and fixing them as well, which, unfortunately, are not covered by our home insurance policy. Also, this pandemic has shown us, now more than ever, that our financial standing could change in a blink of an eye. Therefore, make sure you have enough savings or emergency fund to pay for any unforeseen expenses that will come your way.
Home ownership is a big decision that requires thorough planning and preparation. By answering the three questions above, you will have a better idea on whether now is the right time for you to buy a home. Can you do it? If you can, should you do it? If you should, will you be able to keep it?