Have you been searching Zillow late at night and dreaming of owning your own home? Maybe your friends and family members were able to purchase a home in the last couple of years due to super low interest rates but you weren’t ready and now you’re thinking you have missed out.
I have good news for you: this is still a great time to purchase a home! Inventory is steadily increasing in Hancock County (including Greenfield, New Palestine, McCordsville and Fortville) and the surrounding areas. For buyers, this means that there is less competition for housing and therefore more options for your home selection. Additionally, sellers are more willing to negotiate and bidding wars are becoming a thing of the past.
So let’s dive in to discover if you are ready to purchase a home now. To prepare yourself for purchasing a home, ask yourself these three important questions:
1: Am I in a good financial position to purchase a home?
There are a variety of loan products available to those purchasing a new home (and even more available to Indiana homebuyers who are first time homebuyers!) and it’s important you speak with at least 2-3 lenders regarding your financial situation to determine your best loan product. Even if you have a low credit score or not much money saved for a down payment, there are many options available and a lender will be able to guide you in the loan pre-approval process. Thankfully, I have a wonderful network of lenders who have many years of experience and are super knowledgeable about Indiana specific loan products.
It’s no secret that interest rates have increased this year; as of today they average 6.090% for a 30 year loan. To put this into perspective, two years ago the average interest rate was 3.090% which is why the market was going CRAZY with multiple offer bidding wars and sellers making insane profit off of their home.
However, in 1988, the year my parents purchased their first home, the average interest rate on a 30 year loan was 10.34%! What this tells me is that while the recent drop in interest rates was amazing in that many people who previously could not afford a home have now been able to purchase a home, it also gave many people a skewed view of money lending. My parents, and many other first time homebuyers in the 1980s, had WAY HIGHER interest rates on their loans but they still pushed through to purchase a home because they knew the importance of building wealth for themselves and their families.
As the chart above shows, mortgage interest rates are cyclical, meaning that even if you purchase a home with a higher interest rate, if you wait a few years you can refinance your loan (oftentimes at little to no cost) and capitalize on the lower interest rates that cycle through every 3-4 years.
2: Am I ready to take on the responsibility of homeownership?
When you rent, typically if you have an issue with your home you can call the landlord or property management company and they will repair whatever you need fixed. With your own home, you will need to find repair people to work on any issues in your home. Sometimes you will need just a general “handyman” but other times you will need a specific tradesperson, i.e. plumber, electrician, HVAC technician, etc.
I always have my clients perform a home inspection on the home they want to purchase so that they know exactly what structural or mechanical issues may come up while they own the home. Some issues we can have the sellers repair before closing day (the day we sign the paperwork and you officially own the house) but many times the new homebuyer will be responsible for repairing the little things that come up in the inspection report.
If you’re thinking “uh oh…I don’t know anyone who could help me with these types of repairs…” don’t sweat it! Not only do I have a large network of contractors in the Hancock County area that you will have full access to when working with me, you also have the option of purchasing a Home Warranty that goes into effect on closing day (sometimes sellers will pay for these which is a huge bonus!). Home warranties are great in that for a small service fee ($75-100 depending on the company you choose) a licensed technician will come out to your home and diagnose the issue. The technician will then write a report to the home warranty company and often the company will be able to cover the cost of the repair. Not all repairs are covered in the warranty contract so it is important you know the details of the contract and discuss this with the technician before ordering more work to be done.
If you do choose to use a home warranty, know that I will help you find the best company in your area and to help you navigate the contract so you can decide if you want the home warranty or if you prefer to use individual technicians for your home repair needs. Home ownership is also a great way to improve your own “fix it” skills and you might find you enjoy doing your own home repairs!
3: Am I ready to live in one location for a minimum of 2 years?
The process of finding and purchasing a home, along with moving and settling into your new home, takes a lot of time and effort, more so than when you are renting. I rented for 12 years and in that time I lived in 8 different homes! While moving that many times was challenging, with renting it is much easier to end your lease, pack up and start a new lease somewhere else.
When buying a home, the entire process of finding and purchasing a home can take up to 30 days or more. There is a lot of paperwork, e-mails, phone calls, and meetings that need to occur in order to make this happen. Purchasing a home is not something you willingly want to do every 1-2 years!
In the United States, there is something called capital gains tax. There are certain conditions that must be met to avoid paying the capital gains tax; one of the major ones that causes people to have to pay this tax is living in their home for less than 2 years.
When buying a home, it is important to think about your long-term goals; are you buying this home in a specific area because you have a good job and plan to stay at that company/organization for a long time? Or maybe you want to move to a certain area because of the good schools for the children you have or are planning to have? Can you see yourself making friends with the neighbors and having an enjoyable community experience? Or maybe you want land and the joy of a quieter property?
Every time I purchased home, these were the major questions I asked myself that helped me narrow down the options. Purchasing a home is a very personal and expensive decision and it is important you take the time to consider your motivation for purchasing a home.
So…are you ready to purchase a home? Or maybe there is something holding you back from purchasing a home? Contact me today and I will help you decide what steps to take in order to fulfill your dream of home ownership.
