If you plan on purchasing a home, you are likely aware that there are several variables to take into account. This can become an exhaustive job, and mighty complex. It’s easy to determine the market if your job is an economist but for us mere mortals, it takes time to make such an informed decision. In this article, we’ll look at some of the main points to consider as well as how these may impact your purchasing options. Please feel free to use this as a guide along the way to becoming a first-time buyer.
Look at the Cheapest and Most Expensive States
If you have the potential to move to a different region of the country, you can take a look at the cheapest, as well as the most expensive states, depending on your income and budget. In terms of cost of living, states such as New York, New Jersey and California are associated with the highest prices (mainly due to housing prices and international investments around the city). The current five cheapest states to buy a home are Mississippi, Arkansas, Alabama, Missouri and South Dakota, however, you’d probably need to look at the relative cost of living between each. If we compare Montgomery, Alabama against Brookings, South Dakota, we find that Montgomery is 19.8% less expensive as Montgomery’s housing costs are 70.5% less, health related expenses are also 11.2% less in than in Brookings. Whichever city you are planning to buy in, compare it to the city or area you currently live in. Compare things like cost of housing, cost of health, cost of groceries as chances are you’ll be needing these more often. And also look at crime, education and transportation as well.
Look at Cost of Living and Salary Concerns
It should therefore come as no concern that the very same states tend to be associated with the lowest cost of living. Most analysts consider metrics such as food, utilities, transportation, education and health care. However, we need to mention a trade-off in terms of the most expensive regions. These states also offer much higher salaries per annum. For instance, the median salary in New York is approximately $60,000 dollars. This is then compared with the $35,000 dollars associated with Alabama. You will therefore need to consider your projected income as well as the future status of your industry. In areas such as New Jersey, it’s said to be cheaper to buy a property than to rent – an average monthly mortgage would be approx. $1,100 and rent is approx. $1,400.
Look at the Impact of Interest Rates: Fixed or Variable?
Interest rates are always important when considering a home purchase. Rising interest rates tend to be associated with falling values while a decrease is associated with rising prices. This inverse relationship is important, for you will often have the choice to select a fixed or a variable rate mortgage.
Fixed rates enable you to calculate monthly payments and yet if the predominant rates fall, you could very well be paying more than necessary. Obviously, the exact opposite is also true. Variable rates follow those set by the Fed and if these are projected to rise in the coming years, this option could be wise.
Look at the Potential Role of Politics
It’s been a political rollercoaster over the last 6 months, with the republicans making changes that affects everyone in the country. The Trump administration has promised to cut corporate taxes, to increase the number of domestic jobs and to spur the economy as a whole. These actions may cause prices to rise as an increasing amount of liquidity enters the housing sector.
Look at Possible Incentives
There are a number of incentives you can consider. These include first-time FHA loans, loans from the Department of Veterans Affairs, energy-efficient plans (contact your local state energy office) for “green” homes and subsides from institutions such as Fannie Mae or Freddie Mac. It is worthwhile to see which programs you qualify for. First time buyers should also read this as to how much help they can receive.
Look at The Housing Market as a Whole
The state of the housing market is currently rising and this momentum is predicted to continue into the near future. Still, such observations can and will change from time to time.