I just found an interesting little article from the UAB School of Business. What makes it so interesting?
Check out what they say:
The Best Thing to Do With Your Money in 2012 is Buy a House
Interesting but before you rush into what is probably one of the biggest financial decisions of your life, let’s look at what they had to say. And then you can decide if it works for you!
“First-time home-buyer rates are around 3.8 percent for a 30-year mortgage, so if you can afford a $1,000 mortgage payment monthly for 30 years then you can buy a $250,000 home right now,” says Andreas Rauterkus, Ph.D., assistant professor of finance at UAB. Yes interest rates are super low.
But until you talk to a lender you will not know what price range homes to be looking at.
Or how much down payment and closing costs you need.
Lary Cowart, Ph.D., assistant professor of real estate and finance at the UAB School of Business says “The biggest mistake people make is not doing their homework. People will research the obvious factors — school systems, convenience and neighborhood — but ignore details about the property and the transaction that lead to big problems. Not enough people take time to study things that will affect the transaction and rely on others to do the homework for them. Even smart people can buy a house and not realize it needs work. So suddenly they need $12,000 for a new roof, but they’ve spent all their money buying the house.”
Hmmm….who do you know that constantly suggests buyers get a home inspected?
Maybe that is some advice you should seriously consider…
And you know what other pearl of wisdom that Cowart has for home buyers?
“Holding out to try and find the lowest price is not a good strategy because if the house were to go down 10 percent but the interest rate goes up 1 percent you are not gaining anything. If rates go up 1 percent, say from 4 to 5 percent, that is a 25 percent increase in the interest rate; so the mortgage payment goes up by more than 10 percent and the amount of house that can be purchased goes down by more than 10 percent. People fail to realize that and it is another little thing that will cost them big over the 30-year life of the loan.”
I would agree and add that you also need to understand the all rules/laws/regulations regarding getting a mortgage are changing. Maybe not as often as the interest rates change but it is in your best interest to talk to a lender. Find out how much down payment you need and how much closing costs will be for you. Discuss the different types of mortgages and select the one that fits your personal situation best.