With Low Mortgage Rates, Is it the Right Time to Buy a New House? By James Barry At Isnare.com Ezine Articles

The title of the article in a recent edition of the Toronto Star grabbed my attention immediately: “It may be the right time to take the plunge” into the housing market.

Note the use of the word “may”, suggesting that it may be the right time, but, depending on your circumstances, it may not. What advice did this article (and other recent ones like it) offer to prospective home buyers?

First, you should look to economic indicators to determine whether it is the right time to purchase a new home. Recent news has been good. According to Statistics Canada, the economy grew in June, 2009. The 0.1% increase was the first since July of 2008. News stories from across the country have talked about a robust real estate market, and even a return to bidding wars over highly desirable homes. Car sales are also up. And through it all, interest rates have remained low.

While all of these signs are positive, home buyers should still exercise caution, according to one expert quoted in the Star article. Margot Bai - author of the book Spend Smarter, Save Bigger – recommends that people be conservative. Her advice is summarized below:
•Aim for at least a 10% down payment, but try for 20% if possible. Anything less than 10% means you’ll have to fork over thousands for mortgage insurance.
•Do not rely on low mortgage rates to buy a home that is, in reality, out of your price range. When interest rates go up – and they will go up eventually – you could find it difficult to make payments.
•If you are looking to move into a bigger home, make sure your job is secure. If you have any doubts, stay where you are and build equity in your existing home.
•Speaking of equity, Bai also recommends that you accelerate your mortgage payments and keep the amortization period as short as you can manage – 15 years if possible. This will allow you to pay off more of the principal faster, and save you tons of money in interest over the course of the mortgage.

Of course, anyone with experience in the home buying game will tell you that getting your finances in place is an essential first step. A pre-approved mortgage will tell you what you can afford, and the quoted rates are valid for 120 days.

If you are ready to “take the plunge”, do some research before you even start looking. Select a few neighborhoods with prices you can afford and evaluate each one carefully. Consider things like proximity to work, commuting time and the amenities available in the area. Perhaps it is better to look for a smaller house closer to work than it is to move to a larger house that will require a frustrating hour-long drive to work. Or maybe you want to be close to shopping so you spend less time in the car running errands.

Once you have decided on a location, be sure to take an honest look at any homes you are considering. Make sure they are right for you now, and right for the future. Try to view the home multiple times so you can really get a feel for whether it will suit your needs. Then, and only then, should you put in an offer.

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