Buy a Home Now or Rent Now and Buy Later
Today's Real Estate Market Creates Challenges for Your Living Space
Mar 15, 2009
In today's falling real estate market, the best way to buy is with a big discount. With values dropping, buying at even fair market value could leave you upside down. Upside down means owing more on your mortgage than the value of your house. Today there are many distressed property purchases available. If you find a savvy Realtor, have him or her help you find a distressed sale.
A distressed sale is where selling at a below market price is motivated by forceful dynamics.
- Foreclosure.
- Divorce or spouse's death.
- Tax sale (check your county courthouse records).
- Seller has equity in home and is desperate for cash.
- Probate sale to settle an estate matter where the home is virtually free and clear.
Advantages of Owning
- Not subject to whims and idiosyncrasies of a landlord.
- Able to restructure or remodel according to one's needs or desires.
- If prices ever do go up, selling at a profit is feasible.
- Increases net worth to the extent that there is equity.
- If you fall behind on payments, it takes six to 12 months or more for the lender to get you out. It can be less in California or any other Trust Deed State, however
Advantages of Renting
- Monthly payments are usually less because you don't pay real estate taxes and homeowner insurance.
- A long lease assures payment stability and tenancy even if owner sells to another party.
- If minor or major repairs are needed, the landlord pays.
With the economy in its current condition, it may be wiser to sit out the storm in a rental. Just make sure the details of the lease are in you favor. Rental laws vary from state to state. It's wise to educate yourself on your rights in your state. It is usually easy for the landlord to evict you quickly if you fall behind in your rent. Be aware of this major difference between owning with a mortgage and renting.
Still, if you decide to buy, it's a good idea to get pre-qualified thoroughly by a mortgage professional regarding how much you can borrow and with what type of loan. Thoroughly means your tri-merge credit report is used to determine both credit worthiness and income to debt ratios, along with income documentation. A good mortgage broker with many lender programs available to him or her is a wise choice for that.
With today's economy the way it is, a leveraged purchase is recommended. Leveraged means very little or nothing down and out of pocket. Up to 100% financing is still available with some mortgage programs. This way, if you are foreclosed down the road, you wouldn't lose the money set aside for a down payment. This is grim advice, but these are grim times!
Another Option
A lease with an option to purchase, commonly known as a lease option, is another possibility. It can give you the benefits of a rental for a one to three years or more, while giving you first right of refusal to purchase the house during that time. That means the owner can't sell it to anyone else during that initial period of time unless you default on the lease.
This may be useful. But you would be better off with a land contract, which also enables you to secure a home without a mortgage, and with more benefits. But there can be serious consequences if you don't structure a land contract withmany important details in mind. These details are disclosed through this link.
 |
