by Maurie Backman | Jan. 28, 2021
Before you jump on what seems like a great home, take a step back and make sure buying it is a good idea.
Mortgage rates are sitting at historic lows, so a lot of people are rushing to buy homes. However, if you're interested in becoming a homeowner, you may have hit some snags in your search. Namely, you may have struggled to find the right property given how limited housing inventory is.
But what if you do find a great home that seems to check off the right boxes -- enough square footage, the layout you want, and a nice-sized yard? You may be eager to move forward with that purchase. But if the following factors apply to you, you're better off either not making an offer, or withdrawing an offer you've already made.
Home prices have risen substantially over the past year because buyer demand is so strong. Perhaps you've fallen in love with a home but realize your mortgage payment will be too expensive if you buy it. If that's the case, you're better off walking away.
If you take on too much housing debt, you risk falling behind not just on your mortgage, but on your other bills as well. That could, in turn, damage your credit and create a host of financial problems, including the potential to lose your home. You're better off waiting until housing inventory opens up and you're able to find a more affordable place to buy.
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The purpose of a home inspection is to make sure there aren't hidden problems lurking in the property you're looking to buy. An inspection takes place after you've made an offer on a home and put down a deposit that's kept in escrow until your closing.
Most real estate contracts include what's known as a home inspection contingency. This states that if a home inspection unearths a substantial problem that your seller won't fix, you, the buyer, can walk away and get their deposit back. Some of today's buyers waive this contingency to try to get their offers accepted in a tight market, but it's not recommended. And if your home inspector finds a big issue that your seller refuses to address, it's a good reason to pull out of the deal.
When you apply for a mortgage, your mortgage lender will require proof of a steady income, whether in the form of recent pay stubs, a letter from your employer, or both. Let's say you find a home you like at a time when you're still employed, but you're worried you may be laid off in the near term. For example, maybe your boss just told you last quarter's sales figures were awful. In that scenario, you're better off not moving forward with an offer.
Your lender might approve your application if everything looks good on paper. But taking on a mortgage and then losing your job shortly thereafter could put you in an extremely tight spot where you risk falling behind on your monthly payments.
Tempting as it may be to buy a home right now, there's a good chance mortgage rates will stay competitive for at least the remainder of the year, if not beyond. As such, don't move forward with a home purchase if there's a glaring problem involved, whether it involves the price you're looking to pay, issues with the property itself, or your employment status. In fact, as 2021 progresses, housing inventory is likely to open up. If you sit tight, you may find there are better opportunities to buy later in the year.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
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