Everyone has heard that the residential real estate market has crashed and burned. It might even get worse before it gets better, although it is pretty much lower than it has been for decades. This is a bad time for anyone selling real estate, but not for buying. If you have been pondering whether or not to buy but are either afraid of the market, fear no more. This book is going to tell you everything you need to know about buying a house in this economy or any other market.
Buying a house is not like buying stock. Both are investments and both should be considered long term investments. A house generally appreciates in value each year along with inflation. So does stock. Bank accounts also appreciate in value due to interest, although today’s interest rates are lower than the rate of inflation. If you let it be, however, your bank account will be worth more money in 10 years than it is today, assuming you are getting some interest.
A bank account is the most conservative way to invest. Bonds are also another conservative investment. Stocks are a bit more risky. Most investors will advise that you diversify your investments so that you have some conservative investments as well as some high yielding, risky investments. The younger you are, the more risk you can afford to take. As you get older, your investing should become more conservative. After all, you don’t want to reach retirement age and find that you have nothing because the stock market crashed.
A house, however, is a different type of investment. Unlike stocks, bonds or bank accounts, a house is a necessity. We all need a place to live. And we have a choice between either renting a house or apartment from someone else or buying our own house.
The reason why people didn’t buy homes is because it was very difficult to get a mortgage. We don’t think that a mortgage is a big deal now, but back in the day it was considered a “debt.” It is still a debt, but people’s perception of being in debt has changed in the past 50 years. Today, we are used to buying things on credit. We are used to having a mortgage if we want a house. Fifty years ago, you had to have 50 percent down on a house before you could consider getting a mortgage. Then the bank would want extensive documentation.
Buildings and Loans, as seen in the film “It’s A Wonderful Life” were not banks. They were the predecessors of Savings and Loans that were pretty much eliminated in the 1980s by scandals and the fact that they could not compete with mortgage lenders. A building and loan used to use the money of the depositors strictly to build homes for other depositors. The home owners would then have a mortgage and pay on their mortgage monthly, with interest. The interest would then be distributed to the depositors. It was a concept of neighbors helping neighbors. The building and loan would also build the homes as well. This entire concept got convoluted since its inception and thus was the end of the Savings and Loans.
Today, mortgage brokers make loans to just about anyone. There are no money down mortgages available, special programs for first time home buyers and even seller financing. You do not have to have perfect credit to buy a home. Even people with poor credit or a prior bankruptcy can get a mortgage. And mortgage lenders are dying to make a loan to just about anyone.
Getting back to the nation of renters. We gradually began owning our own homes thanks to the GI Bill that helped veterans of WWII. You can still see GI Bill houses today. They are usually small homes that were built by developers and purchased by vets who took advantage of this program. Gradually, subdivisions started going up all over the place and people began getting mortgages to buy homes. Somewhere along the line in the last 60 years, people decided that it made more sense to pay their mortgage instead of someone else’s mortgage.
And if you are renting, that’s what you are doing. Paying someone else’s mortgage. There are many reasons why people rent, but only two make sense:
1. You are not planning on being in the area for more than a year or two at the most;
2. You have just moved to a new area and are not sure where to buy
Any other reason (no money, don’t want the responsibility, etc.) is a poor excuse. These can easily be overcome.
Poor Credit?
You can get a loan even at a competitive rate. And the rate that you pay will be a lot less than when people were flooding the market to buy homes in the 1980s when the rates were 12 percent. You can still get a decent, competitive rate even if you have a bankruptcy. Go to a mortgage broker who will get you a loan on the secondary market.
Self Employed?
Look for a “no doc” loan. You can get these with as little as 10 percent down. You no longer have to prove two years worth of income. You don’t have to prove any income with a no doc loan. They will do a credit check, an appraisal and that’s pretty much it. No tax returns, no proof of income is needed on a no doc loan.
No Money?
How much are you paying now in rent? Unless you are paying “zero” and chances are that you are not, you are paying someone else’s mortgage. Not only are you not investing in your future, but you’re probably also getting hit with huge income taxes. Even with no money down you can buy a home in some areas. Even if you have to borrow the down payment, you can pay that back with the first year’s tax return. And your mortgage payment will probably be the same as your rent.
Too Much Responsibility?A car is more responsibility than a house. A car breaks down more than things do in a house and needs constant maintenance. It needs gasoline to run and has to have the oil changed. Also, you can get killed when driving your car or kill someone else. A house does not need as much repair, is something that you need to live as you need shelter and, as it is stationary, cannot move down the street and kill someone. Responsibility is part of life. Having shelter is necessary. If you cannot take responsibility for acquiring something that you need to live, you should really talk to a counselor.
Afraid To Miss A Payment?
What if you miss your rent payment? What happens then? If you miss your utility payments - what happens then? Again, you need a place to live. Why pay someone else’s debt off when you can pay your own.
If you are planning on staying in an area for a period of time, you should buy a home. Especially with today’s market. This is a buyer’s market and the prices of homes are rock bottom.
