Top 5 Things to Consider if You’re Buying a Home in 2022
Buying your own home is one of the best accomplishments you can achieve. It doesn’t matter at what stage you are in your life right now; owning a home simply gives you that sense of freedom and success that can’t compare to renting an apartment. You no longer have to worry about your landlord’s rules. And instead of paying rent, your monthly payments can build equity, and your money will be invested in your own real estate property.
Before you buy your own home, there are a lot of factors that you should consider, especially in today’s market. To get a better grasp of what to expect for 2022, here are the top five things you need to take note of when you buy a home.
Local Market Indicators
One of the essential factors you need to consider when you’re buying a house is not something that you have any control of – the local market. As frustrating as it may be, your options will be limited, depending on which market you are interested in. The market you’re scouting may not be in the right location, or it may not have any property that is within your budget. There are even market values that will dictate if owning a house is a viable option or not. So, even if owning a house of your own is becoming cheaper compared to renting one, you still need to consider the current state of the market.
Supply and Demand
Now that home prices are rising, a lot of potential buyers have a hard time purchasing properties within their means. To add to that, current homeowners are now also opting out of trading up their older properties for something bigger and better. Both this rate of appreciation and smarter consumer trends are affecting the current supply and demand for starter homes, making it even more difficult for you to buy your own house, especially if you’re a first-time buyer.
Mortgage and Interest Rates
Choosing a mortgage to purchase your home is a long-term financial commitment. Remember, you could still be making those payments every month for the next 20 years. So, the best thing to do is to consider your primary source of income before you commit to one. The good news is you can find the right type of mortgage for your home-buying needs. However, the bad news is you also have to consider whether you’re willing to pay for it at fixed rates or at adjustable interest rates for the entire duration of your mortgage.
Stock Market Trends
Like most of the factors mentioned, the stock market could also affect real estate, either in a good way or in a bad way. Because of the less risky nature of real estate, every now and then, when stocks start to experience rockier trends, buyers start turning their attention towards real estate. One of the worst things that could happen when the market drops is a potential psychological shift in general consumer attitudes. If buyers start thinking that the market is tanking, then they are more likely to hold onto their hard-earned money. In this case, you may want to keep a lookout for stock market trends and other potential factors that could generally affect the real estate market.
Personal and Financial Considerations
Of course, when you’re buying a home, one of the most crucial factors to consider is your financial standing. The first thing you have to do is to figure out how much exactly you can afford the moment you decide that you’re ready to purchase your own house. One of the guidelines that you should consider is your debt-to-income (DTI) ratio.
To figure out your DTI ratio, first, add up your total monthly gross income. Then, multiply the total by 36% – which is the recommended percentage you should not exceed by most lenders. Next, add up your total monthly debt and compare that to the 36% of your monthly income.
Lastly, add up all your current monthly non-mortgage debt payments. You’ll then need to subtract this from your monthly gross income. This should give you an estimate of the largest mortgage payment you can afford – which should be 28% or less of your monthly income.
Buying your own home is not something that you can do on a whim. It’s a huge milestone in your life which should explain why it’s vital to take note of all these factors. Before making a final decision, make sure that you’ve covered all your bases, researched all the necessary information, and even talked to the right professionals. Once you’ve taken all these steps and considered all factors, then you’ll be more than ready to check your next goal.