The first time the idea of purchasing my first home came to light, it was my future father-in-law that made the suggestion. This was 2 years before I became a loan officer in 2012. I was working in retail finance, but had so much debt from school, the idea of homeownership never crossed my mind. The suggestion from my future father-in-law came up because I needed a place to live. It also may have been a plot to marry his daughter, my now lovely wife. But we will move on from there.
Necessity vs Timing
Most of the time, people get the idea of purchasing a home because they have a lease coming due to either renew or move on to a new place. This creates a necessity for maybe buying a home. It feels convenient to start looking for a home to buy right away when these scenarios come up:
“I am paying $1700 to rent, my lease is coming due, I’d rather pay this money toward a home”.
Or, it’s: “I am paying $1700 to rent, my landlord is selling the place, they are requiring me to move.”
Finally, some scenarios playout like this: “I am paying $1700 to rent, my landlord is raising my rent to $2000, I need my own place”.
Everyone’s example of necessity is different. I find that most prospective borrowers are not prepared for WHEN this time comes. It’s never a matter of IF this happens but WHEN this happens.
Take note, you may not be in the position to buy a home now, but it makes good financial CENTS to start preparing and planning for this later. You then can take necessity and control it with your timing. Preparation is the key to anything financial and puts YOU in control of your necessity. Check out steps to pre-qualify for a home loan
Income, Credit, Assets
Perfect credit nor a six-figure income are necessary to purchase a home. It’s true that your income, credit and assets determine how much you could pre-qualify for or afford for a mortgage payment. Here are some general tips for when it’s a good time to buy a home:
- INCOME – You should have a 2-year work history. This simply means you should be able to show you have consistently earned some sort of income, generally in the same line of work. There are many types of income considerations, especially for self-employed or variable income borrowers. Stable and consistent are what the underwriting guidelines measure.
- CREDIT – A 740 FICO is not required for qualifying for a mortgage loan, nor is perfect credit. Government loan programs (FHA, VA, & USDA) have exceptions for certain types of credit from how low the scores can be to when a bankruptcy must be seasoned by. I’ve had Buyers at 580 & 600 FICOs qualify and purchase a home. Others had bankruptcies seasoned 2 years or less.
- ASSETS – Down payments are not as scary as some people imagine and are much lower than people realize. Veteran borrowers need $0 down (in most cases), FHA buyers need at least 3.5% of the purchase price and Conventional buyers can put either 3% or 5% down as the minimum, depending on their income profile. See more about down payment sources
Have you heard in the last 10 years, “It’s a great time to buy a home!”? This phrase has been used so much over the last 10 years that it frankly means nothing anymore. Yes, it is still a good time to buy a home. But we must ask ourselves WHY in the new decade. The last 10 years included the recovery of the housing crisis from the recession of 2008. Analysts are saying we’ve recovered from 2008 and are now where we should have been (hence why it’s called a recession). So, what does that mean for the future?
The future of homebuying remains strong for most markets largely due to technology and how business is conducted. Right now, the southwest is a hot market for new emerging and developing businesses and becoming a safe haven for year-round operations for manufacturing and call center business types. Property taxes, land, and cost of living are much less in most parts of the Southwest and offer a lifestyle for employees that most of the country cannot compete with including year-round sun, Interstate access for distribution, and close proximity to places like California, Las Vegas, and Mexico. Basically, housing in the Phoenix Metro area is going to continue to thrive, even in a recession because Arizona is what Governor Doug Ducey calls “open for business”.
What does this mean for buying a home in our market? Your property value will continue to appreciate even now. There is a shortage of housing in Phoenix for homebuyers and renters alike. As our market attracts more businesses, there is a need for housing all over the valley. It’s basic supply & demand with housing and it’s expected to continue. Your home will continue building wealth for your future.
Buying a home is personal and not always for everyone. See Beyond the Numbers. It takes some responsibility to understand the opportunity. Only you can make that decision. 10 years ago, the decision was easy because home prices were extremely low. Today, it’s a little more complex only in as much the level of preparation of the prospective buyer. We are here to help in that preparation.