It is always a good time to buy a home, always. The only thing that should deter you is if there is an impending earthquake or a certain hurricane in the next couple of weeks. There is really no such thing as timing the home market. One can try for interest rates, but darn, did they drop so low last year? Every now and again some financial planner or mortgage expert opens their can and spills out some G-F-N-BS about when to buy. Take it from me, there is no such thing as when to buy a home. Let us discuss this.

Buy When It Is Cheap

When property prices are at rock-bottom, some people say it is not the right time to buy. Reason is that prices are dropping. By implication that suggests that if you are renting, keep renting and giving EVERYTHING to your landlord. However if you have just purchased a new home, even if prices drop further below what you purchased for, you can at least write off the mortgage interest in your taxes.

We purchased our home in June 2009 and property prices have dropped further since then. However, we got some deductions from our 2009 tax returns for the interest paid and the points paid at closing. We are not paying a landlord and irrespective of which direction the housing market goes, we have a roof over our heads and we can afford our mortgage which by the way came at a significantly low interest rate. It would have been really idiotic to heed some advice and not buy then.

Buy when the price is on the rise

The converse ironically is also the case. Prior to the housing bubble bursting, property prices were on a steep upward trajectory. Buying a property at that time meant seeing your home value rise overnight. Who can resist that? The interesting thing again is that like good old gravity reminds us what goes up has to come down. Prices rise and fall but it is very unpredictable even for the experts so it will also be foolish to sell your home 18 or 36 months before the housing bubble bursts just because you expect prices to crash. What if it never happens? Analysts are wrong half of the time if not more so making a decision not to purchase a home because they ‘predict a crash’ does not make economic sense.  So in other words, not buying at this time or selling a newly bought home at this time would also be ‘not so smart’.

When not to buy

The only time when not to buy a home is when you really can not afford it. Buying on projected future income increases is retarded. that is because no one person controls the economy. thus you can not put your shelter and that of your family in jeopardy based on hopes for ‘a raise’ , ‘for better business next year when the ARM switches’ or even ‘when interest rates drop!’ One of the leading causes of people not being able to afford their homes is job loss. I recently read a very interesting scenario on Free Money Finance about securing your career. The author is certainly very creative and a good teacher.

Can I afford it?

Plain simple advice from me to you: If you plan to purchase a home, do your homework first. Do not purchase because the mortgage looks like you can afford it, no. In addition to the pre-requisite of making sure you have no credit card debt on which you are carrying a balance, having up to 12 months mortgage payments in a high yield savings account is something to consider as an important security. The down payment could be whatever your lender is willing to accept from you. In addition to that, you should budget at least 10% but preferably 20% of your monthly payments being put aside for repairs and maintainance. That includes association dues and other minor structural expenses.

If after looking at your income and expenses, it seems you can still maintain a reasonable standard of living with all this money going out into your savings account every month, then you are ready to afford a home and you should go get one.

As an African Proverb says, Whenever We Rise is Our Dawn!