There comes a point in nearly everyone’s life when they begin to wonder if they should continue to rent or make the step of purchasing a home – but throw a global pandemic, low mortgage rates and a crazy housing market into the mix, and it makes the choice a whole lot more complicated. Furthermore, since January 2020, home sales have been steadily increasing.1
The first thing to remember: don’t let the circumstances make this an emotional decision. Buying a home is a decision that should be made based on your finances, as well as your preparedness for owning a home. Before you make any real estate purchase, you should strongly evaluate your options to figure out if you are really ready to buy.
What’s Going On With the Housing Market?
At the beginning of the pandemic, the real estate market halted to a stop. Fears of contracting the coronavirus led to a reluctance among most people to engage with meeting realtors, touring open houses and the process of buying a home. However, as fear began to subside, the housing market boomed – many young couples were eager to flee from cities, interest rates dropped and prices didn’t.
Yet as the pandemic continues, experts are predicting that home prices will drop in 2021. If you’re considering taking the leap and buying a home in these tumultuous times, what should you consider?
1. Can You Afford a Down Payment?
The circumstances of the coronavirus have many people itching to purchase homes – but you need to be realistic about your resources. While there are a few different mortgage financing options that require a low down payment, it’s not very likely that you’ll be able to buy a home without any money to put down.
If you do not have the cash reserves to put down for the purchase of a home, then its most likely a good idea to wait and reevaluate your situation once you do. If you still really want to buy a home, take some time to save for the down payment and wait for the housing market to stabilize. The more that you save in the beginning, the more you will save in the long run over the course of a mortgage.
2. Are You Planning to Stay Awhile?
Do you envision yourself settling down, or do you just want out of where you are? If you are unsure of whether or not you want to remain in a particular area for a while, then you may want to hold off on buying a home. Buying a home is a big transaction, and unlike renting, it is not in your best interest to move every couple of years.
On the flip side, perhaps you’ve been thinking about making the move for a long time. If that’s the case, you may want to take advantage of the low mortgage rates. Just keep in mind that we’re in a very unpredictable market. Really think about your motivations for buying before doing so.
3. Can You Afford All the Costs of Home Ownership?
There is much more to owning a home than paying the mortgage every month. Don’t be deceived by declining prices and low rates. In addition to that, you will need to pay for taxes on the property, your insurance, and any repairs. As a renter, your landlord is responsible for many of the costs that you would need to take on once becoming a homeowner. What if your air conditioning unit breaks during the hottest part of summer? What if a pipe bursts? Just because you have enough for a down payment to buy a house in this market doesn’t mean you should. You should be prepared to handle the risks of homeownership by having enough savings in place for these common household expenses that can pop up at anytime.
Buying a home is a big investment and an important step in life. Before leaving your rental situation, take the time to fully consider your options and prepare for all of the financial responsibilities you will face as a homeowner for many years to come. Despite some advantages pertinent to the current housing market, these advantages are rooted in uncertainty – which means you need to be absolutely certain in and prepared for your decision to buy a home.
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