I have to admit I am a fan of home ownership. Why I waited so long to buy a home I will never know. Yes there are a lot of downsides and in some markets it might be prohibitive (e.g. Boston, NYC, San Francisco) which is why we moved to a large city, but the housing market is still reasonable. I know that there are still people gun shy from the 2008 debacle, but if you can I think buying a house is a great idea. Here are five reasons why I think it is a great time to buy right now.
- The winter is traditionally a slower time for the market and prices are lower. It is true that there is more inventory during the spring and summer months, but the prices are also higher. Don’t be in love with a house. Buy a house (or condo) because you can afford it, not because it is perfect because there is no such thing as a perfect house. You can get some great deals during the winter months.
- Interest rates are still at historic lows. Even though the Federal Reserve raised interest rates last month it still hasn’t trickled down to mortgage interest rates. I looked this morning and it was actually a cheaper interest rate than last week. Part of this is probably because of the downturn in the stock market, but the stock market and home prices don’t correlate. This is a great time to buy in terms of interest rates. You can get a 30 year mortgage in the low 4s and 15 year mortgage in the low 3s.
- Buying often beats renting. If you are going to be in an area for a few years (5-7 is recommended) then traditionally buying a house can often be cheaper than renting. Again that isn’t true for some really high cost of living areas, but on average if you see yourself putting down roots why not buy a house.
- You probably can afford a house sooner than you think. The best way to buy a house is still to buy a house with a massive down payment. But let’s be honest. Who has $50-60,000 just lying around. I know I didn’t. But if you look into it each state and the federal government have programs to help you out. For example, Mrs. ROB and me live in Providence, RI. Next year, because of its close proximity to Boston, Providence is supposed to be one of the hottest housing markets in the country. However, most houses here won’t cost you Boston prices unless you live in the really ritzy part of town. Mrs. ROB and I bought a house in a nice neighborhood, within a mile of two universities, for 1/2 of what it would’ve cost us to live in the suburbs of Boston. Our commute is longer, but we saved ourselves a ton of cash moving here. Moreover, there are programs that we could’ve used to help with our down payment and closing cost. One program in particular is called First Homes 100. It is program by Rhode Island Housing where you can get help with 100% of your mortgage and also with your closing costs. In other words, your down payment and closing costs are minimal. The program is limited by income, but the qualifying incomes are quite high, close to six figures. In Massachusetts they have something similar for different counties in the state. They don’t have a 100% mortgage program, but you can buy a house with as little as 3% down and get a Mass Housing loan. Most states have these kinds of programs for first-time home buyers. No matter where you, if you are in the market for a house, I think you should check these programs out.
- A house is an asset that appreciates in value. I am not an advocate of using a house like a piggy bank. If you gain a lot of equity in your house I don’t think you should take out a loan against it, get a line of credit, or whatever just so you can pay off debt. That isn’t what a house is for. However, a house, unlike cars and a lot of jewelry, can appreciate in value. Typically, not more than 3-4% per year, but that is better than nothing. Some people don’t like houses because they aren’t a liquid asset. They would rather save their money or invest it in the stock market. For me it isn’t an either/or it is should be an “and.” I think you can invest AND own a home. A home isn’t a liquid asset, but if I really need money and paid off my house I could always tap the equity if needed. Plus, it makes my net worth grow and you feel “richer” when you own a home.
Home ownership isn’t for everyone, but you might qualify for more than you think. It doesn’t hurt to ask. I qualified a home much earlier, but never pulled the trigger. I should’ve bought a house in 2010 or 2011, but didn’t do it. So be it. Pull the trigger. Check your credit score. You can do it for free at Credit Karma. Why not investigate it a bit? What is the worse that could happen? At least you have more knowledge to make a decision.