Profile picture for user05108390

Should I buy a home now?

I currently rent in Belmont, CA and have been thinking about buying a home since mortgage rates are low and rent is increasing like crazy. Based on several affordability calculators, it looks like my max price is around $350k.

I have a credit score of 780 and make around $70k/year. I have been at my current job for one year, but I've been in the same industry for 5 years if you include college jobs.

I don't have much saved for a downpayment (~20k) and the only debt I have is an auto loan ($220/month). I can pay off the entire loan now, but haven't yet since I didn't want my credit score to drop.

I've heard from several people that it's taken them a long time to find a home in this area, ranging from 6-24 months, due to bidding wars. I've been told to expect up to 10% more than the asking price. Given my price limit, I'm thinking it'll take me quite a while to find a place since there aren't many within my budget.

So my question is: should I consider starting the home buying process now? Or should I wait until I have more money saved up (but then miss out on the lower rate)? If it really takes that long to find a home in this area, I will have more money saved up for the downpayment, but probably not 20%.
  • March 15 2013 - US
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Answers (11)

Profile picture for hpvanc
Do your own homework before you talk to an agent.  Go to the library, and use the internet.  In my opinion you will be seriously over extending yourself if you try to buy a $350K house with your downpayment and income.  Do you have an emergency fund in addition to the $20K?

Another thing to consider if you just graduated from college, are you sure you will be able to stay in the area and move forward in your career?  On that note it looks like prices in your area have advanced more than 15% in the last year, which may be an indication that market has entered a new bubble that can deflate quickly.  With the minimal downpayment even if it is not a bubble about to deflate, if you need to move to continue your career (or for personal reasons) in the next 5-10 years you are likely to lose money on the property, and could easily be forced into a shortsale or foreclosure.  In your situation, the exit strategy, if you need to sell should be a major part of your decision. 

Theoretically housing prices and interest rates rise with wages and inflation, right now housing prices are rising without a corresponding rise in wages and inflation.  I would give very careful consideration to whether chasing the low interest rates is worth the risk to your financial future.
  • March 17 2013
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Profile picture for RealEstateCrew
You should interview several Realtors and begin the process now.  
  • March 17 2013
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Now is most definitely the time to buy. Interest rates are fantastically low and the home prices have hit bottom and are now starting to climb.  You do not need 20% as a down payment.  From the picture you painted, good credit score, low debt, good income, decent savings, you sound like a good candidate for a purchase.  Your next stop should be to talk to a lender in your area to get qualified.  Once you have this in hand you will know exactly what you can afford.   Find a real estate agent you trust and then  Listen to your real estate agent.  Good agents will have a good finger on the pulse of your area and can best advise you on good areas for your budget and can offer suggestions when it comes time to make offers so you can win the bids.  Good luck and happy hunting.
  • March 17 2013
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You make 70, you've saved 20, your max is 310 to me. In any event, the issue isn't saving, because you can't save fast enough to outrace the market. I don't know what appreciation is in Belmont, but if it's 3%, that's $10,000 a year that prices are increasing.

I don't know you well enough to advise you, but I think your decision point is: do you want to buy something for $310,000 (or so) now or wait until you make more money? Only you can provide the answer.

All the best,
  • March 16 2013
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I am not familiar with the California area but Detroit, Michigan was one of the first to experience a dramatic drop in property values. The good news here is that values are increasing much faster than professionals expected. Low inventory levels and multiple offers on homes are the reasons values are on the rise. I've been advising my friends and clients to BUY NOW!  I believe that in just a few years, values will be back where they were before the crisis in 2008. I'm also positive that California and other states will follow this positive path. Good luck and happy home searching :).
  • March 16 2013
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Now is definitely the time to buy. The inventory is low which is why we are seeing multiple offers. Prices are increasing so I would say to start the process now. If you use a experienced agent they can help you through the process and find you a great home. Please feel free to contact me with any questions.
  • March 16 2013
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This is a great time to buy.  Unfortunately there is not a lot of inventory which is why your are hearing that it taking so long to find something.  The best thing to do is to get preapproved from a direct lender.  This way you will know exactly what you qualify for at that point.  This gives you a starting point in your home search.  Your lender will be able to advise you on additional ways to increase your buying power if you are unable to find something in that price range.  For example, you don't need to fully pay off your car.  As long as you have less then 10 months remaining on any installment debt, then that debt is excluded from your qualifying rations.

Also, since you have an excellent credit score above 720, you would be eligible for conventional 97% financing.  The mortgage insurance premium is much lower on this type of financing than on an FHA loan.

These are all things that a mortgage consultant will be able to discuss with you once you actually sit down to get the process started.

I like to consider the home buying process like dating--Iit takes time and you've got to kiss a lot of frogs before you find your prince as they saying goes.  It's a process, but you need to get started!

GOOD LUCK :)
  • March 16 2013
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Now is the best time to buy a home.  Interest rates are still at an all time low and home prices remain very affordable.  Now that the banks have cleaned up their horrible mess, homes are actually very nice to look at. 
Now has never been a better time to take the plunge and become a homeowner  or upgrade your existing home.  Investors are flocking to real estate because it makes sense again.
  • March 16 2013
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These are all great questions. The first thing I would request is that you go to a loan officer at your local bank. Many of your questions will be answered and it is best that they are answered by someone local; because they would know of the down payment programs and any other incentive or special programs in your area. So far, you seem to be ready to move forward towards buying a home. Getting  pre-approved will be best for you because it will allow you to know for certain what you can purchase if that great deal comes your way. Good luck, get pre-approved and you will find a great home.
  • March 16 2013
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I suggest you find a good realtor in your area to walk you through all of this and brainstorm with you.  He/she will have a definite opinion about whether you should wait or try your best to get into the market now - it REALLY depends on specifics of the market forces in your area - and good agent will be honest with you.  He/she will also have a recommendation for a experienced and ethical mortgage professional to help answer your financing questions.  It sounds like you are pretty smart and understand the complexity involved...  I'd be happy to refer you to someone if you need a referral. 
  • March 15 2013
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Profile picture for user05108390
More questions:

    - How long does a preapproval last? If it takes a long time to find a home and my financial situation changes, do I get another preapproval?

    -  Is there any way to avoid the PMI without 20% down on a conventional loan? I'm not really liking the idea of an FHA loan given the FHA premium.

    - Are there any first-time buyer programs that I would qualify for?

    - Is it a good idea to consider foreclosed homes? I'm a total newbie to the real estate industry, but given my budget it seems like a possible option. However I know there are a lot of hidden costs with foreclosed homes so I'm hesitant to take this route.

Thanks for the help!
  • March 15 2013
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