Sometimes real estate decision aren’t based on location but timing.
When should you buy a Auburn-Opelika, AL home?
The best time to buy a home in Auburn is when prices and interest rates are low. When prices are low and there are fewer buyers than sellers, the market is considered a buyer’s market. Buyers can get homes for lower prices and can often demand more concessions from homeowners eager to sell.
Trying to time the real estate market is difficult, even for professional real estate investors. If you’re hoping to try and buy when prices have fallen, here are some key factors to consider:
*Consider the pricing trends in the area your are buying a home.
*Look at the months of supply in the area – In a balanced real estate market, there’s generally around a six-month supply of housing. If the supply is lower, bidding wars are more likely to occur.
*The time it takes the home to sell – If houses sit on the market for a long time, it’s likely a buyer’s market. But if homes are selling very quickly, it’s a seller’s market — and you can expect to pay more for a home.
*New construction – When new construction lags, this keeps housing in short supply and puts upward pressure on prices.
* New housing prices compared to income and employment – The housing market is overvalued in your area if prices are high in relation to the income of local residents. This isn’t a sustainable situation, so prices are likely to fall.
Choosing the right time of the year.
Home prices not only vary over time, but they can also vary over the course of the year.
Supply and demand are big reasons why house prices change with the seasons. Summer has proved to be the most popular time to move and is a popular time for sellers to put their home on the market. While you’ll likely see more inventory in the summer, it’s the worst time to buy if your goal is to get the best deal because prices rise when demand increases.
Make sure your personal life is in order
Most real estate experts suggest you keep your housing costs to 30% or less of your income. You also will want to show lenders you have a steady source of income for at least 2 years.
Your credit score will also make a big difference in the interest rate you obtain.
You will also need to consider how much of a down payment you have to purchase a home. If you have not saved at least 20% of the purchase price of your home you will need to obtain private mortgage insurance (PMI). PMI protects your lender in case of foreclosure — the insurance pays the lender if your home is foreclosed on and sells for less than you owe.
Not only is paying PMI a waste of money but buying a home with a low down payment or no down payment can be a big mistake for another reason: It leaves you very vulnerable to fluctuations in the real estate market.
Waiting to buy a home until you can put at least 20% down gives you a financial cushion so if you need to move but your house isn’t worth what you paid for it, you won’t be in dire financial straits.
Your savings for closing costs
When you buy a home, you’ll need money in the bank for closing costs. Home buyers typically pay around 2% to 5% of the value of the property in closing costs. Closing costs cover expenditures for home appraisals, land surveys, loan applications and origination fees, property taxes, transfer taxes, recording the deed, a home inspection, title insurance, homeowner’s insurance, and more.
Do you have an emergency fund?
First, it can protect you from being foreclosed on. Foreclosure can happen if you’re unable to afford to make payments on your home. Having an emergency fund valued at three to six months of living expenses — including your mortgage — ensures you can keep making mortgage payments for a long time in the event of a job loss or other financial calamity.
You also want to ensure you can afford the costs of home repairs. As a homeowner, you can’t just call your landlord if the roof leaks or the water heater breaks. You could regularly incur expenses of several thousand dollars or more once you own a home. And the older your home is, the more likely it is you’ll incur big costs.
Make sure you have savings for the move and getting your home set up
You may need to pay professionals to move your possessions or may need to rent a moving truck and purchase moving boxes. When you’ve moved into your new home, there may also be furniture and other incidentals to buy.
Consider your other debts
Mortgage lenders look at your debt-to-income ratio when deciding if you can qualify for a loan and what your interest rate will be. Your debt-to-income ratio equals total monthly payments on your debt — including mortgage costs — divided by your gross monthly income. Most mortgage lenders will not give you a loan if your debt-to-income ratio exceeds 43%. If your debt-to-income ratio is too high for you to qualify for a mortgage, you’ll have no choice but to wait to buy a home. You can work on paying extra money toward your debt to bring your ratio down, or consider purchasing a cheaper home so your housing costs are lower and you fall within the 43% ratio.
Consider your short term and long term goals
If your finances are in order and market conditions are good, it still may not be the best time to buy a house. You also need to consider what your future plans are.
In order for your home to hopefully appreciate enough in value to cover the cost of a sale, most financial experts recommend buying a home only if you plan to stay for at least two to five years. Of course, there are never any guarantees about what the housing market will do, but the longer you stay put, the more likely it is you’ll break even on the home purchase even after paying costs associated with a move.
You also don’t know how long it will take to find a buyer, so if you suspect you may need to move quickly, tying yourself down with a home is a bad bet.
So is now the best time to buy a home?
As you can see, there’s no one right answer to the question of when is the best time to buy a home. By considering your personal financial situation, your plans for the future, and the state of the real estate market, you can make a fully informed choice about whether now is the right time for you to buy.
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