Is it Time to Buy a Move-Up Home?
With interest rates at their lowest for some time, you might be thinking that this is a good time to make that next home purchase…you know, the move up to your dream home. In fact, with so many distressed homes on the market, your dream home might be gotten for both an extra low price and an extremely good interest rate meaning more home for less.
Before you make the jump, however, you need to consider more than just prices, square footage and interest rates.
First, you need to consider how much you owe on your current home versus what you can sell it for in the current market. While you might have a good idea of what this number is, you should consult a real estate professional to get a current market analysis just to make sure. Some neighborhoods have declined more than others, and some are rising faster than others, so you need to know exactly where you stand. You do not want to get the entire family’s hopes up and then after finding the perfect house, not be able to sell your current one for enough to pay off the existing mortgage and make the move comfortably.
Evaluate your finances honestly
Next, take stock of your finances and employment. Do you have enough money set aside for emergencies? If you are you relying on two incomes, you need to consider: Are both jobs stable? Will you be starting a family and giving up one of the incomes? How close are you to when you want to retire? Could you make a larger mortgage payment and still live comfortably? Do you want your home paid off before then? In the current economic climate you’ll need to save up at least 20 percent down to qualify for a conventional loan, and you don’t want to tap into your retirement or other long-term investments in order to do so.
Another thing to consider is what you hope to achieve by the move. Do you want to increase you square footage, or yard size? Alternatively, are you ready to pick up that pricy luxury condominium uptown? If you are just looking for an investment, and are happy in your current home and neighborhood, consider purchasing a rental property instead of moving your family.
Your “dream home” can change over time, depending on our life situation, so if you always wanted the country house for the kids, but they are ready to leave the nest, you might want to rethink that idea.
While some areas are seeing modest price increases, many continue to decline due to the flood of distressed homes on the market. If you are expecting your new purchase to increase in value right away, you might need to wait until the market shows more positive movement.
Look at conveniences in the community
Lastly, consider if the move itself makes sense for you. Just because the market might favor the sale of your home, or the purchase of a larger one in a different community does not mean it is right for your family. Do you love your current neighborhood but need more space? Are your kids happy in their school? Are all your friends close by? If you cannot move to a bigger home in your current neighborhood, it may not make sense to move.
Crunch the numbers
So, once you have answered all of these questions and you still believe the time is right for you to make the move, it is time to crunch the numbers. Adding in all of your available income and current and projected expenses, you need to have enough monthly earnings so that your mortgage, property taxes and homeowners’ association dues, homeowners’ insurance or other housing costs are affordable.
Many financial experts say 33% of your take-home income or less should go to housing. Given the current economics, however, you will want to give yourself as much margin as possible.
Now that you know the numbers, begin to look at homes in your price range and below. Do not be afraid of distressed homes. You might get a great deal…but if the home has been empty for a long time, be sure to have a complete inspection done before making a deal. Empty houses can deteriorate quickly.
If you are interested in purchasing your next dream home, CLICK HERE to contact the Mike McCann & The Mike McCann Team
