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When Home Buying isn’t Right

April 03, 2008  |  Difficulty: Easy

Path to mortage
Your real estate agent and mortgage lender may tell you that home buying is the way to go, but you feel you need to assess your personal situation. There are many situations that signify when home buying isn’t right.

How can you tell if it is better to wait?

If asked in one word, how would you describe your financial state? Unstable, unpredictable, shaky? This is a good indication that you should not buy right now. If you are working at a job that has an unreliable income, home buying will be more of a risk that an investment.

If you are anticipating moving to another employer, you definitely should not focus on buying a home. One, you just don’t know how stable your next employer will be until you have worked there for a year or so.  Two, lenders view a job change within the last six months as a major risk, and an increased chance of default on the loan.

Some individuals want a quick investment and think that buying a house is a great option. But this may not be the case. If you are looking for a quick way to build up money, you may find that buying a house is not a fast way to bring in extra cash. Sometimes property values suddenly decrease and this could cause financial ruin. This does not mean that buying a home is not a good investment. In a lot of cases it is. It takes time for the money to accumulate, so a home investor should be patient (for about 10 years!) and willing to wait for the cash benefits. If you are not willing to wait for a substantial amount of time for this investment, it is definitely not a good time to home buy.

But what if you drive by your dream house, and see that is for sale. Even though it is expensive, and you will have to dig and pinch every dollar that you own, you want it hands down. This can be a difficult situation, but even when the want is high, this is not a situation where you should buy. You must think past the price it will cost to buy the house. Typically, the new home comes along with needed renovation and repairs, and even if it does not, things happen and a repair or emergency just may pop up at an inconvenient time.

If every dollar has gone into the down payment and next month’s mortgage, there is no way for you to make the needed changes on your property. And when there is financial trouble, foreclosure will be looming closely. When renting, there is more freedom to downsize. This is not the case with homeownership, you do not know if you will be in a position to sell your house quickly. You should think about these points before putting yourself into a financial tight spot.

Are you just recuperating from the blow of bankruptcy? If so, this is not the time for you to consider buying. Really, your main focus should be on credit repair. When you take the time to establish a better credit rating you will be in a better position to get a quality mortgage loan with good interest rates. If you search for a loan while your credit score is very low, you will find that the rates and fees are much higher. It is better to wait so that you are able to get the best deal possible.

Check your credit report about once a year to make sure that you are making good progress. If you find that your improved payment history is not documented, contact the credit bureau to ensure that it will be listed. If you find that past credit problems are still listed, when they should have been removed, make sure that they are erased. If these past problems are listed when they shouldn’t be, this can affect the type of deals you can apply for on your mortgage loan.

Rates are lowering all the time. So while you are waiting to repair your credit, you may find that rates become lower! Your patience might really pay off.

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