How to buy a home in this wild housing market

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I am faced with a dilemma.

I’ve been doing this back and forth for the past few months, but I’m ready to sell my home in Dallas. My family goes beyond that because I have three children. It’s an old property too. It needs to be modified, but I don’t have the patience to survive the process. It’s up to the new owner.

This is very Time to sell. Unfortunately, I won’t be living in my car, so I’m a buyer too. And that’s it That’s awful Time to buy a home. In my neighborhood, I’ve seen homes sell for $ 50,000. There is a fierce bidding war for almost every property on the market. Many buyers choose to get a shaft inspection in neighborhoods where most homes were built in the 1950s and need an inspection.

Hence my dilemma. It sells in a hurry. But what am I buying? I don’t want to get involved in the bidding war, and I don’t necessary The house right now.

Take a step back and ask more basic questions about your home.

Do you need to buy a house?

The most obvious reason to buy a home is to make your loved ones happy. Joking aside, the number one reason to own a home is inherently inefficient. It’s a lifestyle preference. Maybe you like your neighborhood or school. And it’s good that there really is something your..

But let’s take a look at economics.

Yes, owning a home has certain tax advantages. You can cancel the interest and property tax. But let’s be clear. The only and most important reason to own a home is fairness. For most people, owning a home is the biggest single investment they’ve ever made … and it will almost always benefit them. In a rising market this can lead to a slump.

Let’s play with math. Let’s say you bought a home worth $ 300,000. They paid a $ 60,000 deposit and collected the rest of the money.

Let’s say your home is valued 10% higher. Now valued at $ 330,000. Well, your equity has increased by more than 10%. That $ 30,000 increase in value is fully equivalent to 50% of the equity of $ 60,000. You have just made 50% of your money.

not bad!

Your sincere bankers will not allow you to borrow this type of money to buy stocks, cryptocurrencies, or anything else. But they also lend it to real estate in a low interest rate environment.

It’s all great. Before diving into the bidding war, however, there are a few things to keep in mind.

Mortgages are double-edged investments

Think a little about the word “mortgage”. The origin of this word is old French and is translated as “death vow”.

You have a debt that you can spend the rest of your life. And the leverage that increases your profits in the rising market decreases in both directions. If the value of the house falls by 10%, half of the capital is lost. And that assumes you’re 20% lower. FHA loans may require a 3.5% down payment, with a current average down payment of around 7%. At these levels, even the smallest fluctuations can wipe out your capital and leave you in the water of credit.

Then what?

You can’t sell a home unless you bring more equity on the table to make up for the shortfall. You can get away from that, but you will ruin your creditworthiness and give up hope of winning back your stocks if or when house prices rebound.

I’m not saying this to scare you into buying a home. I prefer to own it to rent it. But I leave you with a few points to consider.

How to buy a house in today’s Red Market

1. With good job security, it may be okay to stretch a little bit Payment information. For example, if you can conveniently pay $ 3,000 a month, but your dream home costs $ 4,000 a month, It could be like that It’s okay if you’re willing to make some cuts elsewhere in your budget When They believe that in a year or two your income will be high enough to pay off monthly.

If not, would you like the house to be bad enough that you can avoid vacations and restaurant meals for the rest of your life?

If the payment is substantial, don’t. You will regret the decision and resent owning a home. It causes unnecessary stress.

2. Don’t get involved in the bidding war. That’s crazy. Do you think that if you are forced to rush into such a process, you will make good financial decisions?

3. I love where you live. You need to be sure that you intend to live where you have lived for at least a couple of years. When the housing market strikes, you don’t want to be able not to sell your property without cleaning it up.

As for me, I’m still considering my options. And if you can’t find your favorite home at half the price, feel free to rent it for a while.

For safe use

Charles size more

Co-editor, Assets in the Green Zone

Charles size more Is co-editor of Assets in the Green Zone Specialized in income and pension issues. You can see him every week in his video segment Invest with Charles.. He is also a frequent guest on CNBC, Bloomberg and Fox Business.

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