I have heard all my life that one of the basics of business is to “buy low and sell high.” Over the past weeks we have probably all watched as the stock market goes up one day and down the next. If I had lots of money to invest, I’m not sure I could handle watching that every day.
I always wonder if the mega rich start the frenzy by selling at the beginning when things are up. Then others panic and sell and the price goes down. Toward the end of the day the rich buy it all back at the lower price. I don’t know how it all works. Maybe you do. I do know that we all work way too hard for our money and definitely want to do the smart things with it.
Jilian Mincer recently wrote in SmartMoney.com, from the Wall Street Journal that with the Dow Jones Industrial Average down more than 400 points today, and many market experts predicting more volatility ahead, some advisers are recommending their clients put some of their cash to another use. They are suggesting that you buy that house, rental or vacation home. Potential homebuyers certainly have plenty of incentives. Home prices are still way down in many parts of the country, and mortgage rates are nearing their all-time lows. Freddie Mac reported that the 30-year fixed-rate mortgage averaged 4.15 percent for the week ended Aug. 18, its lowest reported rate in 50 years.
There are other reasons to act now say the experts. While the recent passage of the debt deal is likely to keep mortgage rates low for now, homebuyers could soon find themselves with fewer incentives once the details of the debt deal are ironed out. Lawmakers have been debating a simpler tax system with lower tax rates and fewer tax breaks that could include reducing the mortgage tax deduction as part of the long-term spending cuts that must be agreed on this fall.
Of course, buyers still need significant down payments, stellar credit and job security, but if “you’re financially prepared to do so, it’s a great time to buy a house,” says Greg McBride, senior financial analyst at Bankrate.com. “Affordability is tremendous, and if you’re in a position where you have the financial security that others are lacking, you’re in a great position to grab a good deal.” Rebecca Hall, a financial planner in Reston, Va., said several of her clients have decided to buy second homes instead of putting more money in the market. “People don’t view real estate as volatile as the market,” says Hall. “Housing prices go down, but people aren’t on-line looking at it every day,” she says. “You view housing as a much longer term investment so it’s a little easier to handle [the volatility].”
In both up and down housing markets, it pays to be disciplined. Even with unsteady home values and tough home loan requirements, home ownership remains a desirable goal. But since you only have so much money, you have to make choices. Keep in mind that the smartest choices are made with your head, not your heart. Line up your ducks. The process of choosing and buying a home can be challenging, but it will go much smoother if you’ve gotten your own personal house in order. Check your credit. Go to annualcreditreport.com and look at least one of your three credit reports. Make sure all the loan information is correct and fix any errors.
Seek loan approval. Ask your local Realtor for lender recommendations and compare mortgage rates at local banks and credit unions, where you are more likely to get personal service. Choose one to get pre-approval. While you’ll still have to formally apply for a mortgage, pre-approval lets you know what price range you can afford and it tells the seller that you’re ready to buy a house. Pull your paperwork together. You’ll need a financial statement, two years of tax returns, three months of bank and brokerage statements, recent paycheck stubs. Your lender will let you know exactly what you need.
Make smart choices. When you start shopping for a house, you will want the right price, the right neighborhood and the right space. Be a good reporter. Walk the neighborhood, check out the schools and crime statistics and get to know what’s nearby. Get the details. Learn as much as you can about the house, including how long the property has been for sale, the original asking price. Chat with neighbors to see if they will share any details.
What not to do. Don’t rush and don’t get seduced by a cool place. Don’t buy and move. Don’t bother buying if you aren’t going to be in your house at least a few years. Don’t just go for cheap. You can fix up a trashy property in an up-and-coming part of town, but you can’t fix up a trashy neighborhood. Don’t fall in love too fast. The first place you see may look up to date, but it may not be. Look at a number of homes to assess what level of repair and amenities are good deals. Tips were adapted from The Wall Street Journal. Complete Homeowner’s Guidebook, by David Crook. Don’t forget to always consult a Realtor.
Questions or comments can be made to Kerry Suess at firstname.lastname@example.org.