Right Time To Take On Mortgage Debt


Is There a Right Time To Take On Mortgage Debt?

Aug, 19th 2016

I love Real Estate. I was attending college in Santa Cruz, CA several years back and after graduating college I decided to stay in the area. I worked some odd jobs and gave a go at a couple of exciting dreams I had. After one year of meandering around like most college students I decided to move back to the Seattle area where I was from. The number one reason…I wanted to buy a house. The California housing Market was sky high and as a 24-year-old I knew that I would never be able to get into the market. I wanted in, I wanted to invest.

As a real estate agent, one of the most asked questions I get is, “Is it a good time to buy a house?” My response will always be YES! “Am I saying you should take on the largest debt of your life?” Yes! Then the typical follow up question is, “What if the economy tanks again?” My response is always, “Don’t get yourself in a bad mortgage loan.” The alternative to home ownership is renting. With renting you are taking your largest monthly payment and literally paying off someone else’s investment instead of your own. As someone who also owns rental property, I thank you, but as a real estate agent, I shake my head. Pay off your own investment. Commit! Jump in!

Here are three simple things that make a good mortgage loan:

  • Affordability: Do not overspend. Yes, I am a real estate agent that is not trying to push you into a larger house to increase my commission. You must be comfortable with your monthly payment and all that comes with it, taxes, insurance, repairs. We all like nice new things and we want to live in a house that is nice and new. But let’s be honest, most of us cannot afford it. Compromise and paint makes everything look better.

  • Down Payment vs. Interest Rate: In the Seattle area, I am seeing a lot of first time home buyers coming into the market with huge down payments. This is great as it decreases your loan amount and gives you more buying power, but you need to look at the long haul. Over the next 15 or 30 years you have a huge loan that you’re paying interest on each month, and you have to consider whether or not it makes sense to buy down your interest rate. Ask your mortgage lender to run the numbers and see if buying down a half point on your rate would save you more money on the life of your mortgage. Buying down the rate might be better use of your cash rather than buying down the payment.

  • Locked in Rates. It is a rare scenario that I would recommend getting an ARM (Adjustable Rate Mortgage). Believe me, I learned the hard way (a story for a future article). Your rate should be locked in from the moment you sign on the dotted line. You should know that over the next 15 or 30 years you will be making that same payment no matter what. Lock it in folks!

Mortgages are the one debt that works in your favor. You get crazy tax right offs, better credit scores, and it is one of the largest return on investment (ROI) out there. So YES, it is the right time to buy a home!

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