The conservative and traditional investor would say that one should stay in a home for about five years in order to recover the cost of the purchase. But looking at the trend for the housing market today, the conservative way is not always the best way.
The conditions of the housing market are different from state to state. The decision to buy a house is influence by the change in housing market in a certain state, and the changes for each state vary through the years.
Never buy high and then sell it low. That would be a waste of your time and money. When the market prices are going so high or gong so low, you may want to wait the tide out. You may think that buying low would be great, but the thing is, the price may never go back up and would continue its decrease. Wait it out first and see where it goes. Smart Money magazine has a worksheet that would compare the advantages of renting or buying a new house. Your down payment, interest rate, income bracket and current market appreciation rates would be included in the market appreciation calculation.
An example of this would be a purchase of a #400,000 house in Colorado would recover $88,750 of its purchasing cost is the buyer would stay on it for three years with an estimated market appreciation from 9% to 11%. And if the buyer would stay in the house for another two years, the recovery would be at $120,360.
Buying needs a lot of thinking and big decision-making. Job status, divorce and unforeseen health expenses can bring you down to bankruptcy and eventually, foreclosure. Some may survive this but if you do not have enough financial cushions, this could be a big dent in your stability. Big life events can greatly affect your ability to be a homeowner. If you are relocating within the next five years or would be having kids soon, you may want to postpone your purchase. Job changes and a credit score below 630 is also a sign that you are not yet ready to own a house of your own.
Even without the life events that would contribute to your decision, your loans alone could tell you if you are ready. Yes, houses nowadays are sold with low-or-no down payment and you could pay the mortgage in a monthly schedule. But a credit that is increasing every year is a great risk for you to take on. One financial bump and you may never regain your financial balance. So the question is when to buy?
Now would be the perfect time. But if you are up to your neck with credit, maybe it would be better to wait to clean up your debts first then get a loan for that new house. Even for a slightly higher price, you would still be in better shape. Big decision — you have to really sit down with your mortgage broker and financial counselor before to start attending open houses.
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