Should I Buy a House Right Now?

Most economists claim that the economy is turning around, however slowly, and many people are considering purchasing a home. The harshness of the economic downturn has left a wide variety of potential home buyers: those relocated by a change in work, previous owners who have had to change residences, first-time buyers, etc. While these individuals, families and couples may all come from different lifestyles, they may also have the same question: Is now a good time for me to buy a house?

As we delve into this question, we are faced once again with the standard financial answer: It depends. Ideally, those who are ready to buy have stable employment, savings, little chance of relocation and excellent credit. Few of us live in an ideal world however, so we have to look a little deeper.

So, how do we answer the question about home purchase readiness? One of the best ways to determine if you are ready is to weigh the pros and cons in home purchase, so let’s take a look at each.

Pros to Purchasing a Home Now

As most people know, there are a few major benefits to purchasing a home right now (as of press, February 2011). First, house values have greatly decreased in parts of the United States, which is excellent news for potential buyers.

In fact, most houses in California, a lot of Arizona, much of Florida and many areas in larger cities across the US were probably priced too high for years. Now that the housing market bubble has burst, these home prices are much more manageable for would-be buyers.

What this means for borrowers is that they can now buy at reasonable prices — that are fully supported by appraised values. Buying that cute house in LA will be more affordable, and the house value has some hope of increasing at a stable rate over time.

The other big positive aspect about purchasing a home now is that mortgage rates still linger near the all-time low, now coming in around 5% APR for a 30-year loan. Some financial analysts predict the loan rates will increase as the economy rebounds, so now may be a good time to purchase.

Cons to Purchasing Now

Of course, to every silver lining, there is also a cloud. The negative side of purchasing a home right now is that banks must follow much more stringent rules. This means that good credit, a stable job history and adequate savings can play a much bigger part in your home-buying picture.

However, this does not mean that those with one or more strikes against them absolutely cannot purchase a home. Those potential buyers who may not have adequate savings, for example, may have to jump through a few hoops — and maybe even a three-ring circus — to get approved.

This circus could include applying for FHA (Federal Housing Authority), VA (Veterans’ Affairs), or state-sponsored loan programs — all of which have very stringent rules and long wait periods for approval. Also, these programs require a lot of documentation, that may include the standard (your three months of bank statements, pay stub and W2) or the ridiculous (three months of bank statements from your grandfather, who is giving you $5,000 toward closing costs).

It is important to note that even with these programs, not everyone will be able to purchase a house. Sometimes it is just not the right time, but in applying for a home loan, would-be buyers can find out the steps they need to take to get on the home-purchase path.

Another concern for many potential homeowners is the very changeable state of the economy right now. Economists may say that the economy is recovering, but some folks just aren't feeling that in the bank balance yet. Many of us may want to be more cautious than we would be in a less unstable time.

Stability

Every person is in a different boat, financially and personally, and there is no way to lay down hard and fast rules about the right time to buy. Probably the best rule to use to decide is stability.

Is your income stable? Is the housing market in your area stable? Is your job stable? Might you be relocated? The more confident you feel about all of these things the more realistic it is to buy a house. Make a list of pros and cons about buying a house, with a focus on stability and see if the pros outweigh the cons.

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