Financial Topics & Tips
Buying a Home in Today’s Economy
October can be a great time to find a new home. Here are a few tips to keep in mind.
Whether you’re a news junkie or you rely on your better half to keep you updated on the latest, you’ll likely hear somewhat conflicting messages about the state of today’s economy. One day you hear about rising employment numbers and the next day you’ll read about the lagging growth in the GDP, or Gross Domestic Product. While things look relatively stable now, no one can guarantee what the next few years will bring.
Fortunately, you don’t have to give up on the home of your dreams because of a fluctuating economy. Here are four steps you can take to make sure your money – and your house – are completely safe, regardless of what’s going on.
1.) Maximize your down payment
The magic number for down payments has been established at 20% of the home’s value. Those who can’t afford to plunk down that much money, though, will often put down a much smaller amount.
If you can’t come up with a down payment worth at least 5% of the home’s total value, you may not be ready to buy a house just yet, because having little or no equity in a home could mean taking a loss should you need to sell it. Also, not making any profit from selling your home means you won’t have funds to cover the down payment on your new home and offset the closing costs. That’s why it’s always best to own as much of your house as you can.
2.) Look for less home than you qualify for
If you’ve been hoping to qualify for a more expensive home, you may be planning to push the limits of your mortgage approval. In fact, it’s best to buy a house that comes in well under your approved limit, allowing you to maintain a lower debt-to-income ratio. This will give you breathing room and keep your mortgage payments from dwarfing your monthly budget.
Also, if the economy worsens and you feel the effects, you’ll have a smaller mortgage payment to scrape together each month.
3.) Pick the right Realtor
Here’s how to cut through the hype of the real estate market and find the Realtor that is truly best for you:
• Speak to recent clients. Ask about their level of satisfaction and their overall experience with this agent.
• Look up the licensing of your prospective agent. You should be able to easily find this information online.
• Choose a winner. A Realtor who has been recognized for their excellent work is one you want working for you.
• Research how long the agent has been in the business. You typically don’t want a rookie Realtor who’s building their experience through you.
• Check the current listings under the Realtor’s name. Are they in the same price range as the house you’re hoping to buy?
4.) Look for red flags
A professional inspection before signing on a home is a given, but did you take a careful look around? You don’t want any unpleasant surprises after you’ve moved in.
Check for the following:
• A sturdy roof. Do the shingles look like they’re going to give way in a few years? That can translate into expensive repairs. If you like the house and don’t mind replacing a faulty roof, use it as a negotiating point to get a lower price.
• Efficient heating and cooling systems. These can be costly to fix and replace, and inefficient systems can really hike up your utility bills.
• Strong structural components. Most sellers will give their house a new coat of paint before showing it to buyers, but don’t be fooled. If the foundation is weak, the best paint job won’t cover it up. Check beneath the surface for strong pipes, wiring, and insulation.
• Overall functioning of the home. Don’t be shy; try out everything in your potential new home. Open doors and windows, turn on every faucet, flick each light switch, flush toilets and taste the water. If you find any major problems, you may want to give this house a second thought. If you don’t mind a handful of minor repairs, remember to use these as a negotiating point.
Don’t forget to contact The Tennessee Credit Union to learn about our home loans and mortgages before you start your search. We’re here to help you with the financing so you can get the best home for your needs. Click here to be directed to our TTCU Mortgage Center to learn more about rates, resources and services.