Wednesday, August 15, 2012

More Good News ...But Remember To Think

The news just keeps getting better if you've been hoping to buy a home.  First, interest rates are incredibly low.  If you need some perspective, try this: when I was looking to buy my very first home (back in the pre-computer days of the eighties), the realtor gave us a little book that helped you figured out the monthly cost for every possible interest rate.  The lowest that book went was 9 percent.

"It'll never get lower than that," she said.

And she was right at the time. We financed at 11% and felt very fortunate.

Now interest rates are all below 5% and some rates actually start with the number three.

Absolutely incredible.

There's one place where the costs haven't been going down - that long table where buyer, seller, attorneys and the bank sit together and pass around the checks: the closing.

But that's changed.

According to an article published this past week, closing costs have dropped more than 7% since new federal regulations went into effect requiring banks to be more accurate about those costs.  It's no small news - on a $200,000 home, that's a savings of over $3500.

Sadly, my home state of New York still tops the list of most expensive places to close a real estate deal - $5400 for a $200,000 loan.  Florida, Texas and Pennsylvania also hover nearby.  For a deal, look to Missouri, Kansas, Colorado and Iowa.  Total closing costs there average about $3000 for the same loan.

Does this mean you should run out and buy a house? If that's been your plan, yes. The time is right and all factors are on your side.

Maybe a bigger house than you planned on?

If you can, now is the time. But listen to what's being said when someone tells you to "buy as big and as much as you can because it is never going to be this affordable again." Did you hear the words "AS YOU CAN"?

In the enthusiasm over your dream home, it's easy to rationalize.  Sure, it's the perfect house. The price will never be lower. Interest rates are at historic lows. Even closing costs are down. Why not??? So it's a stretch. You'll make more money, you'll pick up an extra job, you'll grow into the payment.

I've been there. I have been so smitten with a house that I got into a bidding war for it, going well over my comfort zone with a realtor whose response was, "Good for you!"

What proved to be good for me, though it broke my heart, was that I didn't get it. Because I was acting from emotion, not logic, and the fact is I'd never have been able to afford that house over the long run.

If you've been thinking about buying, now is a good time.  If you're looking, be realistic about what you can comfortably afford. This is your home and you're in it for the long haul. Fall in love, but fall in love smart.

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