When interest rates are low, potential homebuyers are in a frenzy, and sometimes to harsh consequences.
So says Bill Petrey, a realtor and the founder of AgentHarvest, recalling a time when mortgage interest rates were extremely low, home prices were falling and homeowner credits – breaks on your tax bill – were in full swing.
Buyers saw the appeal, and some made the jump with looking where they’d land: often into a pile of debt. They rushed into buying a home they couldn’t really afford. They weren’t prepared. They hadn’t really thought about the cost of homeownership: the down payment, closing costs, monthly mortgage payments and more. Rather, these wayward buyers were taken in by the low prices.
Although this “house fever,” as Petrey refers to it, is of another time, it’s a story that’s relevant today: interest rates are astronomically low in early 2013.
Don’t rush into it like those past buyers. Know the building blocks to buying your first home. First things first: homeownership and taking out a mortgage is a question of debt: what you’ve accumulated in your lifetime and how you’ve dealt with it.
“Years before they start looking for a house, they need to pay off as much debt as possible and save up as much money as possible. Having less debt on the books and enough money to pay a large downpayment makes it much easier to qualify for a loan at a competitive rate,” Petrey said.
His suggestion is especially apt in today’s market, because, this year, prices are expected to go up, and as they do, lending won’t be quite so loose.
“As the real estate markets tighten, being prepared will make the difference between getting the home you want and losing to more qualified buyers,” said Chris Paoli, a broker and the owner of the Paoli Group.
The first step in that process, according to Paoli: a meeting with a lender and learning what you can afford.
Further, consider hiring an agent. And more than that, hire the right agent, one who has the credentials and positive reviews from past clients.