How do I know if I'm ready to buy a house?

Kinda funny really. It reminds me of "How do I know if I'm ready to have a baby?"  Simply put, you'll never truly "know." But you can take steps to ensure that you're prepared as best as possible to own a home...or...if it's best to wait.

Recently, (perhaps because at the time of this post it's tax time) I've had a sea of prospective clients asking me two questions: 1) How do I know if I'm ready to buy a home? and 2) Is now a good time to buy a home?

Truth be told, after 10+ years in the industry, I have learned that those aren't actually the questions these prospective clients are really asking.
 What most are really asking is: 1) Do I qualify to buy a house right now? and 2) Will I make a profit (build equity) if I buy now, or should I wait until it's a better time?

Let me give you my very tongue-in-cheek "I'm exhausted, so let's cut to the chase!" answers, then I'll go more deeply into the "There are a number of key factors that influence the answer to those questions." answers after that.

Now, with my tongue firmly place in my cheek...here are the "I'm exhausted, so let's cut to the chase!" answers to those questions!

Q1: Do I qualify to buy a house right now?  

A1: How could I possibly know? I don't have access to any of your financial information. If I did, I wouldn't know what to do with it.  I'm a real estate expert. I, by choice, don't "do" loans. I search for homes, negotiate terms on contracts, and protect my clients throughout real estate transactions. That's a full time job, in itself. Talk to a lender. Better than that, make your lender your new best friend! He or she is the ONLY person with the power to get you into a home, today...in three months...or next year. Your lender can accurately answer questions such as; "Should we wait until after we pay our taxes?" "Should I pay off all of my credit cards?" '"We need a new car. Is it OK to buy one now, or do we have to wait until we close escrow on our home before we buy another car?" Let the experts be experts. Find a lender that you trust, then trust them to provide you with the answers and service that you deserve. 

Q2: Will I make a profit if I buy now?

A2: (See A1:) How could I possibly know? I don't have a crystal ball. Nobody does.  Even the very best agents in the country don't influence the market, they respond to it. Yes, there are market trends; both macro and micro markets, but they are only indicators, not a means to see into the future. If I find a crystal ball, I'd be happy to share it with you. That said, if I really had one, I'd probably be surfing with my boys in Costa Rica while my wife tans herself on the beach. 

OK. Now with that out of the way, let's lift the hood and see what's really inside.

Q1: Do I qualify to buy a house right now?  

A1: The very honest answer is often the hardest to hear, but you've got to sit down with a lender, or two or three, and let them run the numbers. This can, and often does, ramp up anxiety levels, but please know this. The lender's I have the pleasure of working with are not just phenomenal and ethical in what they do, but they are true professionals.  They've heard and seen it all. 

• "But my divorce isn't even final and I have two credit cards that I just walked away from!" Seriously, they don't care...at all.  Their job is not unlike mine in a way.  Their job is to determine what the fact area, create a realistic plan of action, then execute. 
• "I just want to pay off all of my credit cards before I talk to a lender." STOP!  Take a breath.  Often times, paying OFF credit cards can be detrimental to your credit scores.  "Should I pay them down?"  Perhaps. "How much should I pay off?" Ask the lender!  They are on your team! They deal with this ALL THE TIME.
• "But we just bought a boat, and I don't think we'll qualify." I've seen boats, RVs, Student Loans, Back Taxes, etc. paid off as a condition of the terms of a loan.  In short, let the experts be the experts.  Remember, they don't get paid until or unless you secure a loan...through them!  What better motivation could they have to work efficiently and effectively on your behalf?  It's perfect, really. They have to perform...or they don't get paid! So, don't wonder if you qualify to buy a home right now.  Ask.  Just call 'em and ask 'em!  Like jumpin' off the high-dive! It's really easy.  It just feels hard before you do it. Once you do it, it's a piece of cake!

Q2: Will I make a profit if I buy now?

A2: The market will always fluctuate. A homes values is the function of several dynamic and critical factors. In business 101 they call it Supply & Demand. Just like football tickets! When supply goes up, price goes down. When Demand goes up, price goes up. How does that basic law of business influence real estate values?

• Supply: How many comparable homes are for sale right now?
• Are new homes being built?
• Is your area one with quick turn over, or is it a more mature area where homeowners tend to keep their homes, or even 'will' their homes to their children?
• Over the last year; three years; five years, have the number of active listings increased or decreased?

• Demand: How many buyers are not just looking (ie, clicking on similar homes on Zillow) but are both willing and able to purchase a comparable home?
• Is your local metropolitan area thriving or retracting?
• Are more people moving to your area or away from your area?
• Are mortgage interest rates (how much it costs to borrow money) low enough to create a sea of buyers? (As interest rates decrease, demand for your home increases, and vice-versa.) or are the Feds threatening a rate hike, scaring prospective buyers out of the market?
• Are their grants and down-payment assistance programs available?
• Is your home ready for an FHA or VA buyer?

• Costs of Buying: 
• How important is it that you rest at night knowing that your landlord isn't going to sell the home your living in, or worse, default on it without telling you.
• Tax benefits. Yes, there are tax deductions for home owners, and there are often deductions for the closing costs involved in making that purchase. But, are those deductions worthwhile?  Do the costs (both financial and emotional) of purchasing and owning a home outweigh the costs of renting? 

OK, from a practical, Little League and Girl Scout Cookies standpoint, what does all of this mean?  It means this:

1. Don't wonder if you qualify. Ask a lender...today.  
2. Unless you're buying for investment purposes only, buy a home to live in, not with plans of cashing out big-time in the next 2 or 3 years.

Until next time.

 

Andy Blasquez  Cell ~ 909.539.3292
BRE#01826135
E-mail me on Andy.Blasquez@gmail.com