As with any investment, buying a new home is all about timing. For some it is a gut feeling and for other’s it’s a careful calculation of mortgage interest rates and down payments. Experts will agree that the best time for buying a new home is when interest rates are low, when it’s a buyer’s market and when you are comfortable with the decision. However, waiting for these factors to align can take some time and in the end the final decision is yours so it really comes down to your personal situation and what feels right. If you are leaning towards making a buying decision on a new home consider a few tips that will make the decision a little easier.
The 2.5 Multiplier Rule
When people are getting ready to buy a new home they become familiar with the 2.5 multiplier rule. Basically what this means is that you take your household’s annual gross income and multiply it by 2.5 to determine the amount you can afford for a mortgage. While this is a good starting point in figuring out the financing remember that it does not take into account how much you are putting down, the cost of homeowners insurance and property taxes. The mortgage cost is an important factor but it’s not the only one so when you are calculating the costs for buying a new home be sure to include all the costs so you know when you have enough to make the purchase.
Some people feel they have to buy a home to keep up with the status quo. Unfortunately this pressure causes many to make an investment decision they will soon regret. Don’t put yourself in a situation you can’t handle just because you think that you have to own a home. Having enough money to make a solid down payment and still have an emergency savings fund is crucial when it comes to buying a new home. Buying a house is a long-term commitment and if your job is not secure or you plan on taking time off to go back to school then maybe it’s not the right time to buy.
Do you like what you see?
There are always new homes for sale but that doesn’t mean they are the right ones for you. Even if you have the financing to make it work don’t buy just because you can. Spend time figuring out exactly what you want from a new home and if you think it’s better to go with new home construction. Remember, existing homes were built by someone else and for someone else so the chances of finding your dream home among existing homes is slim. Make a list of features that you must have in order to be comfortable and only buy when your needs are met.
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